IMPACT OF FOREIGN EXCHANGE MANAGEMENT ON NIGERIA BANKING SYSTEM.

Currencies play a critical role in determining macroeconomic performance, influencing key variables such as inflation, trade balance, investment flows and overall economic stability. Foreign exchange plays a critical role in determining macroeconomic performance, influencing key variables such as inflation, trade balance, investment flows, and overall economic stability. The development of the foreign exchange market in Nigeria has been influenced by changes in the structure of international trade, institutional reforms and changes in production in the country. international trade patterns, institutional reforms, and production changes in the country. Before the establishment of the Central Bank of Nigeria (CBN) and the passage of the Foreign Exchange Control Act of 1962, agricultural exports controlled foreign exchange earnings and were controlled by commercial banks. was incorporated and the Exchange Control Act of 1962 was passed, the agricultural exports controlled the foreign exchange earnings and were controlled by commercial banks. The shift to crude oil exports in the 1970s, however, centralized currency control within the CBN and increased reliance on oil payments, which opened the economy to international shocks. 1970s however centralized control of foreign exchange in the CBN and increased reliance on oil payments and this opened the economy to international shocks. Continuing struggles such as exchange rate volatility, dwindling external reserves and distortions in foreign exchange allocation have affected economic stability and diminished productive sectors of The economy, particularly in agriculture and manufacturing. continuous struggles such as exchange rate volatility, declining external reserves, and allocation distortions of the foreign exchange have affected the economic stability and diminished the productive sectors of the economy especially in agriculture and manufacturing. Exchange rate volatility is one of The challenges of great concern to Nigerian banks and impacts liquidity and credit creation, asset values and overall financial performance. exchange rate volatility is one of the challenges that have been of great concern to banks in Nigeria and has impacted on the liquidity and credit creation, the value of assets and the overall financial performance. Repeated policy changes, excessive dependence on imports and unreliable currency management increase systemic risks and make them more difficult for monetary authorities to manage. Repeat policy shifts, overreliance on imports and unreliable management of foreign exchange increase systemic risks and make their management by monetary authorities more difficult. Given that foreign exchange plays a crucial role in sustaining economic growth, it has become paramount to ensure that foreign exchange resources are well managed in order to improve Nigeria's macroeconomic environment and strengthen the resilience of banking systems. Since foreign exchange plays a crucial role in the upkeep of economic growth, it has become paramount to make sure that the resources in the foreign exchange v are well managed to enhance the macroeconomic environment in Nigeria and enhance the resilience of the banking systems..