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.
