The second-tier foreign exchange
market (SFEM) in Nigeria was established as a cartimal element of the country’s
structural adjustment programme (SAP) whose essence is the restoration, the
medium term of a healthier path to national economic development. The SAP
itself was introduced against the background of a myriad of mounting economic
problems, which the country has had to grapple with since about the middle of
1981 following the slump in oil prices and demand in world market and the consequent
adverse effect it had on domestic crude oil productions, government finances,
export revenues, external reserves and debt servicing capability.
Beside the
country experience large external and fiscal. The imbalances large scale
accumulation of trade arrears problems of rapid growth of external debt. And
distortions in the sphere of reduced industrial capacity utilization, severe
shortages and high prices of raw materials and many essential commodities,
declining in public and private investment and so on.
It was in light of the gravity of
some of these problems that SFEM was introduce essentially to achieve a
realistic exchange rate for the naira through the operation of market forces.
This is expected to bring about a move optimal allocation of the nations scarce
foreign exchange resource.