Achiever Project Material 08058580848 and 08140350866: DESIGN AND IMPLEMENTATION OF AN EXCHANGE RATE COMPUTATION SYSTEM

ABSTRACT

The indiscriminate fluctuations of the exchange rate over the years have threatened the value of naira in the international market with its adverse effect on the balance of payment position of the Nigerian economy. In view of this, the main objective of this study is to design and implement an exchange rate computation system that will help financial industries to know the value of any foreign currency in naira. The system will be developed using visual basic 6.0 and access database. The new system will guarantee effectiveness, efficiency and timely information on the rate for converting from any currency to naira. The financial industries stands to benefit a lot from the new system as it will be automated.

CHAPTER ONE

INTRODUCTION

1.1                   Background of the Study
International trade involves the movement of goods and services between two countries. Payment for such goods and services are however made in an agreed upon currency between the exporter and the importer. For example when a Nigerian businessman imports goods from his American counter part, the American exporter may demand that he be paid in American dollars, thus the Nigerian importer will have to deposit the naira equivalent of the dollars with his bank, who in turn remits the funds to the exporter. Commercial banks therefore play an important role in international trade. They act as financiers and agents.
In Nigeria, problems arise in this international trade transaction because of the inefficiency in our financial system which makes way for ‘lag’ between the time the importer makes payment for the goods at his bank and the time the funds are actually remitted to the exporter. This remittance lag introduces exchange risk into the transaction. For example the rate prevailing at the time of payment by the importer may differ from the rate at which the Central Bank will use in remitting the funds. These exchange rate differential results in either exchange rate loss or gain on the part of the importer.
Commercial banks in Nigeria generally cope with this exchange rate risk by adjusting the importer’s account with the volume of the gain or loss arising from the exchange rate fluctuations. For an exchange rate loss, the bank debits the importer’s account and treat the amount (of the loss) as an overdraft and charges interest accordingly. Any exchange rate gain is however credited to the importers account. The bank merely saw their role in the transaction as that of any agent who shares in the profit but not in the risk. This approach by banks shifts the exchange rate risk entirely to the importers, funds are held by the commercial banks during the duration of this lag period. The question then is who bears the burden of the delayed or rate interest on this amount.
The commercial banks have refused to bear any part of the burden because they think the federal government is unable to settle foreign bills in time through the Central Bank and this gives rise to the interest charges.

1.1    Problem Statement
The major problem of exchange rate fluctuations in Nigeria was discovered to be shifted to Nigeria importers via the letters of credit and the issue of delayed interest because of the remittance lag that is prevalent in this method of payments. International growth has gone hand in hand and with the development of transportation. Hence, there is need for an effective and efficient means for exchange rate computation to avoid delay in payments for a foreign transaction.

1.2    Aims / Objective of the Study
The objective of this project is to create an automated system that will help financial institutions:

Maintain a data base of foreign exchange rates for various currencies
Compute the value of any currency in naira automatically.
Obtain exchange rate report index

1.3    Purpose of the Study
This purpose of this study is to develop an automated exchange rate computation system for financial institutions.

1.4   Significance of the Study
The significance of this study will be of immense benefit to the following:-
(i)              Importer and Exporters who are always trading and in much need of finance can easily convert their money form one currency to the other.
(ii)           Bankers, especially commercial banks who are the operators of the central bank give guidelines on exchange rate will now find it easy to compute exchange rate.

1.5    Scope / Delimitation
The project will cover all forms of exchange rate computations irrespective of the currency.

1.6    Constraints / Limitations
During the process of this research work some drawbacks were encountered while trying to get adequate needed data and information.
They include the reluctance of the management of the firm under study to release vital information, which they feared would jeopardize the security of the organization. Secondly, time and financial constraints which had great influence to this work hindered the smooth development of this project.

1.7    Definition Of Terms

International Trade: Means trade between nations in goods and services which involve the use of difference currencies and is subject to additional regulation such as tariffs, quotas and exchange control.
2. Exchange Rate: The rate or price at which a country’s currency is exchanged for the currency of another country. For example, you can buy one U.S. Dollar for ~~N128.00 with Nigeria naira.~~
3. Integrated Economic Units: Is defined as a situation when different sectors of an economy, usually the agricultural and industrial sectors work together efficiently and are mutually interdependent. As part of the development process, this situation is usually coincident with the achievement of sustained growth.
4. Consumption: This is the act of using goods and services to satisfy current wants while theoretical precise these are particle problems in meaning consumption. The main problem arises in the treatment of consumer durables.

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Achiever Project Material 08058580848 and 08140350866

Tuesday, 24 January 2017

DESIGN AND IMPLEMENTATION OF AN EXCHANGE RATE COMPUTATION SYSTEM

ABSTRACT

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