The Nigerian economy is highly dependenton a number of external variables beyond the control ofpolicymakers and domestic agents. Most important among thosevariables is the price of oil, which is highly uncertain anddetermined in fluctuating international markets. With oilaccounting for more than 90 percent of Nigeria'sexports, 25 percent of its GDP, and 80 percent of its publicrevenue, a fairly small price change can have a significantimpact. Largely because of changing oil prices, totalexports value increased tremendously between 1972 and 1980,and then dueto a drop in world oil prices Nigerian exportsvalue dropped back to near 1972 levels in 1986. Clearly thisreliance on oil production for income generation has seriousimplications for its economic policy management. At present,Nigeria faces serious economic problems. To return to a pathof sustainable growth and of poverty reduction, the countrymust address a number of critical issues, includingpromoting fiscal transparency and fiscal discipline, andreturning to market-determined exchange and interest rates.But managing the exposure to oil revenues and external debtwill also be important in establishing the foundations forthe sustainability of such policies, once they are adopted.
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