Exchange Rate Management in Nigeria: Historical Trends and Policy Insights

Mercy Femi-Olagundoye and Sikiru Adetona Adedokun
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Mercy Femi-Olagundoye: Babacock Business School, Nigeria
Sikiru Adetona Adedokun: Obafemi Awolowo University

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 2, 88-102

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.

Date: 2025
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