Implication of Foreign Exchange Management and Global Economy Down Turn on Nigerian Economy (A Case Study of Eco Bank Plc Ilorin Branch)

Abstract

The need for foreign currency policy management arises only within the framework of countries engaged in international trade in contract to a closed economy, whose scope does not transcend its intra country trade transactions. Foreign exchange is the means or ways of effecting payment for the international transactions it can be acquired by a country through the export of goods and services, direct investment inflow drawn down on external loans aid or grants and it can also be expanded on settling international obligations. It is made up of convertible currencies that are generally accepted for the settlements of international trade and other external obligations. Such currencies include those of the group of seven (G7) industrialized countries made up of the united state Dollar, British pound sterling, Deutsche mark, Japanese yen, French, Italian and Canadian dollar. The foreign exchange market is the medium of interaction between the sellers and buyers of foreign exchange in a bid to negotiate a mutually acceptable price for the settlement of international transactions. The objectives of the market include the provision of an avenue for the exchange of national currencies and the creation of an effective mechanism for the allocation of foreign exchange.The foreign exchange market consist of the seller (supply) and buyer (demand) of foreign exchange. The major participant in foreign exchange market are the monetary authorities (Central Bank of Nigeria) authorized dealers (Bank) agents of the public sector, and the private sector as well as correspondent banks abroad. The supply of foreign exchange is derived from oil and non oil exports, capital by receipts include draw down on loans, expenditure of foreign tourist in Nigeria, repatriation of capital by Nigeria resident abroad as well as invisible receipt by the private sector. On the other hand the demand of foreign exchange consist of payments for important external debt service obligations personal home remittances (PHR) by foreign nations resident in the country, financial commitment of international organization and the country’s embassies abroad as well as other invisible out payment by the private sector.