Exchange rate policy and external imbalance :: the Nigerian experience : 1960-1989

Effort has been made in this work to draw a comparative analysis of the alternative exchange rate policy adopted in Nigeria and to ascertain the relative influence of the real exchange rate on Nigerian external trade. The study employed two methods of analysis, namely: historical and econometric methods. Using conventional economic indicators, the study concludes

that the flexible exchange rate, tagged second-tier foreign exchange market (SFEM) has generated a relatively more buoyant external payment account. The Econometric method, on the other band, has confirmed the widespread belief that exchange rate appreciation boosts import consumption and weakens the non-oil experts. Furthermore,the sub-sectoral analysis of imports demand suggests that the exchange rate policy has a differential impact on import components that must be noted in policy decision. To strengthen the role of flexible exchange rate in balance burden of payrnents management, of external adjustment the study recommends that the should be borne, at least partially, by restrictive financial policies, viz: monetary targets should be adhered to as rnuch as possible, so that they will not. be reduced to a mere window dressings and a stumbling black to the potency of SFEM.