Foreign Exchange Crisis in Nigeria: Triggers, Policy Choices and Banking Outcomes

Abstract

This study was conducted to examined the effect of foreign exchange crisis in Nigeria: triggers, policy choices and banking outcomes. The collapse of world oil prices and the sharp decline in petroleum output in the early 1980s, put Nigeria in a horrible financial situations and serious economic challenge. This led to austerity measures in the country. The implementation of Structural Adjustment Progeamme (SAP) which started in 1986 during Babangida regime was prescribed by the International Monetary Fund (IMF) and the World Bank. This serve as a panacea to the country’s economic sorrows. Some of the conditionalities of this programme include the devaluation of Nigeria’s currency, privatization and commercialization of public enterprises, removal of petroleum products subsides, reductions in expenditure on social services like health, education, water and sanitation as well as rationalization of labour in the public sector. The socio-economic effects of each of these conditionalities were highlighted in this work. Ex-post facto research design was adopted in this study. The reason is that, the authors made use of secondary data / information which was collected through online, journals, magazines, National Bureau of Statistics and other documentary source. The data collected were analyzed using descriptive and qualitative methods of data analysis. It was concluded from the findings of this study that; Nigeria’s repeated FX crises illustrate the difficulty of managing an oil-dependent economy with weak fiscal discipline and shallow export diversification. SAP has not contributed significantly to the development of the Nigerian economy and this called for the need to diversify the nation’s economy by developing sectors like agriculture, solid minerals, as well as the manufacturing sector. It was recommended by the authors from the findings of this study that, Nigerian government should be stable in controlling the exorbitant prices and inflation that comes with SAP and also try as much as possible to reduce corruption and capital flight in the country, as well as making and implementing economic policies that would be in consonance with our historical, economic and cultural realities.