The exchange rate is perhaps one of the most widely discussed topics in Nigeria today. This is not surprising given the macro-economic importance, especially in a highly import dependent economy as Nigeria. However, following the fluctuations of the Naira in 1986, a policy was induced by the structural adjustment programme (SAP).This made the subject of exchange rate, a topical issue in Nigeria. The goal of every economy is to be stable, and to have a balanced balance of payment. As result of using the floating foreign exchange determination system, the country achieved that. The country also embarked on devaluation to promote export and stabilise the rate of exchange.
Prior to 1986, Nigeria was on a fixed exchange rate determination system. At that time, Naira was very strong in reference to dollar. The exchange rate was one naira to one U.S dollar that is; #1 =$1.The increasing demand for foreign exchange and the inability of the exchange control system to evolve, an appropriate mechanism for foreign exchange allocation in consonance with the goal of internal balance, made the fixed exchange rate determination system to be discarded in September, 26 1986 while the structural adjustment programme (SAP) came in.
The main objective of the new exchange rate policy (SAP), was to pressure the value of the domestic currency, maintain a favourable external balance alongside the overall goal of macroeconomic stability and to determine a realistic exchange rate for the Naira
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