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Exchange Rate Management in Nigeria: Historical Trends and Policy Insights

Author

Listed:
  • Femi-Olagundoye, Mercy

    (Babacock Business School, Nigeria)

  • Adedokun, Sikiru Adetona

    (Obafemi Awolowo University)

Abstract

The exchange rate is critical in any economy, especially where imports exceed exports. A depreciated local currency boosts export trade by making it cheaper in the international market and increasing foreign exchange inflow. However, it also makes imports expensive and depletes available foreign exchange. The study reviewed the exchange rate in Nigeria on a decade basis for a holistic overview of the rate over six decades. Nigeria’s import trade is massive compared to the export trade. As a result, the demand for foreign currency is constantly rising, and due to insufficient supply, the exchange rate continually depreciates. Different exchange rate systems have been adopted to manage the rate, but none has yielded a desirable sustainable result. The pre-colonial and pre-structural adjustment programme (SAP) eras saw no significant concerns about the exchange rate, with the Naira being stronger than the US dollar, and the rate was fixed throughout. Since the introduction of SAP, different exchange rate systems like the Second-tier Foreign Exchange Market, Autonomous Foreign Exchange Market, Retail Dutch Auction System and Nigerian Autonomous Foreign Exchange Market have been used, yet the Naira has depreciated several times. There is a need to control the demand for foreign exchange, supervise parallel market activities, support export initiatives and monitor the repatriation of export proceeds.

Suggested Citation

  • Femi-Olagundoye, Mercy & Adedokun, Sikiru Adetona, 2025. "Exchange Rate Management in Nigeria: Historical Trends and Policy Insights," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(2), pages 88-102, February.
    • Handle: RePEc:bcp:journl:v:9:y:2025:i:2:p:88-102
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    References listed on IDEAS

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    1. Tornell, Aaron & Velasco, Andres, 2000. "Fixed versus flexible exchange rates: Which provides more fiscal discipline?," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 399-436, April.
    2. Pinto, Brian, 1987. "Nigeria during and after the Oil Boom: A Policy Comparison with Indonesia," The World Bank Economic Review, World Bank, vol. 1(3), pages 419-445, May.
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