Nigeria Exchange Rate: Towards Nigeria’s Exchange Rate Convergence to Pre-Buhari Years

Abstract

This paper explores the trajectory of Nigeria’s exchange rate policies, examining their evolution and impacts on the Naira’s value. From the fixed exchange rate era to the recent Unified Exchange Rate System, the study dissects historical shifts and their repercussions on the economy. The Nigerian exchange rate regime has gone through different eras from 1970s till date. Various factors necessitated the need for exchange rate policy changes; however, the result of the policy changes have over the years been eroded and its value has been on a continuous decline. Key factors contributing to the Naira’s persistent decline, including import dependency, reduced oil production, and inflation, are scrutinized. The role of currency speculation and the impact of government policies are also analyzed. The paper recommends short-term measures, such as adjusting exchange rate policies and lifting import restrictions, and long-term solutions, including infrastructure development and sectoral growth. The government should monitor the behavior of the exchange rate market closely and ensure interventions using both fiscal and monetary policies are implemented to fortify Nigeria’s economic resilience and counter the continuous depreciation of the Naira. Keywords: Exchange Rate, Exchange rate regime, globalization, fiscal policy.