Exchange rate disequilibrium and inflation in Nigeria 1970-1995: an empirical study

This research probes into the relative roles of exchange rates fluctuation in gerieral
and the specific regimes in particular as causes of inflation in Nigeria. Two distinct
exchange rate regimes are identified; the pre-1980 period (1970-1980) when the country
enjoyed economic prosperity as a result of the oil boom, the supply of foreign currency was
not an issue of great concern, and administered exchange rate regime existed. From the
1980s as part of the reform process designed to restor the economy on a growth path
including access to international capital, a new foreign exchange thrust was evident. The
second regime started specially from september 19986. It was characterized by a floating
rate mechanism linked to mark2t 'forces c~lleci°' 's~cond Their Foreign Exchange Market .
(SFEM)" A more serious inflationary pressure, expansionary macroeconomic polic:ies and .
a strong parallel market for foreign exchange were noted during the second regime than fo
the first administered exchange rate period.