FOREIGN EXCHANGE MANAGEMENT: THE NIGERIAN EXPERIENCE

Foreign exchange could be defined as the monetary asset used for the settlement of current international transactions and for financing imbalances in a country's external payments. It could arise from foreign currency receipts from the export of goods and services, inflow of foreign capital such as loans and investments or from grants, aids and gifts which represent unilateral transfers. The interdependence of Nations in terms of international trade has grown so much that, perhaps, no country can lay absolute claim on self-sufficiency in its resource requirements or on a perfectly balanced supply of resources. Also since resources (including foreign currency) are scarce, the need for management of such resources becomes inevitable. Foreign exchange earnings from international trade transactions are vital for the economic development of most nations especially the less developed countries since such earnings can induce increased factor supplies and promote the development of technical-know-how which should enhance domestic capital formation and economic growth. Consequently the role of foreign exchange has become a critical element in the development planning process of less developed countries, it, therefore, becomes necessary that for a country to optimise the advantages of foreign exchange earnings, it has to have a sound foreign exchange management strategy.