Experimental Results and Discussion 1 Experiments with different coatings

For this study we collected data on the following variables (i) Gross domestic Product, (Y)

(ii) Money supply - (MSS) (Hi) Domestic Prices - (PD) (iv) International Reserves - (RE)

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(v) Domestic Rates of Interest - (RD)

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(vi) Value of Imports - (IM) (vii) Value of Exports - (X)

(viii) Nominal Exchange Rates - (EN) (ix) Unit value of Imports - (pIM) (x) Unit Value of Exports - (PX) (xi) Foreign Prices - (PF)

(xii) Home goods' Prices (i.e Non Traded Goods' Prices) - (PH) (xiii) Domestic Credit to Government - (DCG)

(xiv) Domestic Credit to the Private Sector - (DCP) (xv) Trade Balance - (TB)

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(xvi) Current Account Balance - (CUB) (xvii) Capital Account Balance - (CAB) (xviii) Change in Reserves - (DRE) (xix) Government Expenditure - (GE) (xx) Government Revenue - (GR)

(xxi) Foreign Rates oflnterest (Using USA's as proxy) - (RF)

For each country most of the data were got from the International financial statistics (IFS) of the IMP (Interrjational Monetary Fund), the Balance of payments yearbook also of the IMP, and the Government Finance Statistics Yearbook. Among others the following were collected from the IFS' various years, - International Reserves, Domestic Rates of

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Interest, Nominal Exchange Rates, Foreign Rate of Interest. (i.e USA's). In the case of Nigeria the following additional variables were also got from the IFS,

- Money supply, Domestic Credit to Government, Domestic Credit to the Private Sector, Export Value, Import Value.

However data on Nigeria's, Government Revenue and Government Expenditure were from the Central Bank of Nigeria's Publications." In particular the Statistical Bulletin of the Central Bank of Nigeria proved invaluable. Similarly, Ghanaian data on Current Account Balance and Government Revenue as well as Government Expenditure were got directly from the Bank of Ghana, Research Department.

As for Uganda the majority of her data were got direct from the Bank of Uganda. The Bank of Uganda's "Monetary-Survey of 1992 provided data on Domestic Credit to Government, Domestic Rate of Interest and Nominal Exchange Rates. Data on Uganda's GDP, were collected from "Key Economic Indicators" of the Statistics Department of the Ministry of Finance and Economic Planning .

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CHAPTER FIVE

DESCRIPTIVE ANALYSIS OF DATA

"When moving from the PRECISEformulations and GENERAL PRESCRIPTIONS of economic theory to the real world of policy, itis necessary to remember that we leave the realm of SYSTEM and PRECISION for a world of APPROXIMA TION, which operates not by LA W but by TENDENCY"

Scammell (1974)

Some of the key economic aggregates on which the exchange rate impact directly are the value of a country's exports, the value of imports, the trade balance, the current account

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and the level of international reserves. Also the exchange rate could impact on domestic prices and indirectly on the level of real income. In this chapter we describe with the aid of appropriate charts and tables the behaviour of these macroeconomic aggregates over the

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period covered by the study both under fixed and under floating exchange rate regimes.

5.1 The Trade, Current and Capital Account Balances

One of the key aggregates of interest to this study is the trade balance (TB) and its behavioural pattern during th~ period of study. In Nigeria the trade balance in the early years of the 1980s was almost always negative. Out of the 12 quarters of 1981 to 1983 the TB was negative for 9 of the quarters. This probably reflects the squandermania attitude

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which resulted from the oil boom of the 1970s and the difficulty in stemming the tide when there was a reversal of fortune. This negative trend in the trade balance atthis period in time probably explains the adoption of "austerity measures" in 1982 in order to put a brake on import-growth and reduce the level of government expenditures. Among others the

"austerity measures" included the banning of certain categories of imports and the reduction of Basic Travel Allowance (BT A) along with other trade controls. The "austerity measures"

were officially known as Economic Stabilization Act (1982).

Apparently. the effect of the austerity measures on merchandise trade only came to be felt from 1984 when the trade balance was in surplus and this surplus trend continued until 1990. It is interesting however to note that the current account balance however was -negative for a considerable part of 1984 - 1990 in spite of the positive balance on the trade account. In fact out of the 8 quarters of 1986-1987 the current account balance was negative for 7 quarters. this was in spite of the Structural Adjustment Programme (SAP) that had been put in place since the last quarter of 1986. It is only in the last three years of the study (i.e 1988 - 1990) that the current account balance became positive. Given the fact that the trade balance had exhibited a positive trend since 1984. then the negative balances on the current account for an the years of 1984 - 1987 (except for 1985) can only reflect the increasing dependence of Nigeria on the imported skilled labour and other services of her trading partners. such that the services balance ensured that the current account balance was

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negative. In fact out of the 16 quarters of 1981-1984 the current account recorded deficit

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balances for 15 quarters. This probably partly explains the need for SAP in 1986.

The capital account balance was positive from 1981 up to 1984:4 reflecting the inflow of external loans. However, from 1984:2 the balance on this account started a declining trend and by the first quarter of 1985 it had become negative. The negative trend on the capital account continued until the first quarter of 1986, thereafter the tide changed again. These negative trend seems to reflect the drying up of external credit lines as the level of Nigeria's external loan skyrocketed, and also reflect the huge repayment burden that Nigeria faced. The inflow of capital peaked in 1983, when for that year alone capital inflow was some Nl.7 billion, an increase of about 55% over the 1982 inflow of Nl.l billion. As credit lines dried up capital inflow also started a downward trend from a level of N2.95

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billion in the 4th quarter of 1983 to NO.32 billion in the 4th quarter of 1984. By the first quarter of 1985 there was no inflow at all, rather there was a net outflow of NO.51 billion.

With the inception of the structural adjustment program however capital flowed in again, as the country was deluged with all kinds of structural adjustment loans from both the World Bank and IMF and other multilateral financial institutions. A considerable proportion of the old (outstanding) loans were rescheduled by pushing their repayment farther into the future .