Journal of Banking, Volume 6, Number 1, June 2012, 19 – 40: ISSN 1597 - 2569 Structural Adjustment Program (SAP) in Nigeria: An Empirical Assessment. BigBen Chukwuma Ogbonna* Department of Economic, Ebonyi State University, Abakaiki begbenogbonna@yahoo.com 2348037467628 ABSTRACT This study evaluates the result of Structural Adjustment Programme (SAP) on Nigerian economy. The period under review was bifurcated into pre- SAP (1960-1985) and during SAP (1986-2008) periods to enable us investigate the extent to which SAP has achieved the cardinal objectives of exchange rate stability, minimal price escalation and trade balance adjustment. Using quarterly data for the period 1960 – 2008, we employ co integration analysis and error correction mechanism (ECM) technique to tests whether the objectives have been achieved. The results suggest that in both time horizons, the role of exchange rate depreciation in trade balance adjustments appears to be inconsequential. The results further suggest that the problem of Nigeria appear not to be that of demand management as diagnosed by prescribers of SAP, but rather that of supply. The exchange rate has remained volatile and kept a downward trend while inflation and import index have kept rising profiles. All these suggest that SAP failed to achieve the cardinal objectives in terms of exchange stabilization, minimum acceptable inflation rate, substantial reduction in import demand index and non-oil export promotion. This must have accounted for it’s official abandonment in 2006. To this effect, we suggest that the Central Bank of Nigeria plays its stabilizing role in the economy through reversed appropriate economic policies tailored towards effective supply management for improved internal and external sector performance. Keywords: Exchange Rate, SAP, Co integration, ECM, Supply Management., Trade Balance. 1. Introduction Nigerian economy during the first decade after independence could reasonably be described as an agricultural economy because in the words Ogen (2003), agriculture served as the engine of growth of the overall economy. During this period Nigeria was the world’s second largest producer of cocoa, largest exporter of palm kernel and largest producer and exporter of palm oil. According to Alkali (1997), Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins. Lawal (1997) observed that agricultural sector contributed over 60% of the GDP in the 1960s and despite the reliance of Nigerian peasant farmers on traditional tools and indigenous farming methods, these farmers produced 70% of Nigeria's exports and 95% of its food needs. However, the agricultural sector was relegated to the background when Nigeria became an oil exporting country. This relegation was attributed to inappropriate exchange rate policy which made the prices of agricultural output too low to give farmers