“In the attempt to explain some of the possible causes of the instability, particularly in the principal currency, our study looked at the macroeconomic policy characteristics of all six phases of the auction system between September 26 1986 and December 1991. We found the fiscal and monetary discipline was lacking on the part of the government, but this does not sufficiently account for the steep depreciation the naira has experienced. We therefore examined the impact of the five major factors on the rate. These are the
auction systems, effect frequency of bidding effect, auction system cum frequency of
bidding effect, month-of-the-year effect, and day-of-the-week effect. For the auction system effect, we found that the level of depreciation the naira-dollar exchange rate experienced was significantly influenced by the type of auction system the monetary authorities adopted. We also found that frequency of bidding exerted some influence on the rate of depreciation. The joint impact of both the auction system and
frequency of bidding was much larger on the rate of depreciation when compared with
their individual influences.”
