The Nigerian pound was introduced in 1959, and it external value was fixed at par with the British Pound
Sterling which in turn defined its United States Dollar (USD) value as $2.80. Nigeria joined the International
Monetary Fund (IMF) after independence, and the Nigeria Pound had its parity defined in June 1962 in terms of
Gold at one Nigerian pound equals 2.48828 grams of fine gold. This confirmed its original USD per value. The naira
replaced the Nigerian pound as Nigeria’s currency in January 1973, its per value was set at half that of the pound.
Hence the exchange rate became $1.52 to the naira. The rigid relationship between the USD and the Naira was
terminated in April 1974; the fixed rate for sterling had been broken earlier in June 1972 when the sterling started to
float officially. In February 1978, the system of determining the Naira exchange rate against a basket of currencies
of Nigeria’s main trading partners was finally adopted. However, as seen in Fig. 1, the value of the Naira against the
USD has been non stationary. Hence, forecasting a variable in the financial markets is a matter of imperative
importance, especially in a country like Nigeria