The Political Economy of Exchange Rate Policy and Capital Control in Nigeria

This paper examines the primary cause of the exchange rate management failure in Nigeria by evaluating the motivating factor for these changes and reviewing the role of politics and interest group in the Nigerian exchange rate management. The findings show that politics, institutional incentives, and group interest mostly play a significant role in Nigeria’s exchange rate regime determination, as evidenced in the habit of changing the exchange rate system by almost all the political regimes that have existed in the country. More so, the changes are attributed to factors such as different parties and regimes having different macroeconomic preferences, incumbents’ efforts to increase their re-election prospects, and by interest groups that lobby for strong or weak currencies.