The collapse of world oil price early in the 1980s coupled with prouncement by some countries that they were broke and therefore unable to service their debt signalled the beginning of what is commonly referred to as the world debt crisis. Hitherto, oil rich nations have engaged in a spending space and have in the process acquired expensive tastes. Following the fall in their export receipts occasioned by the decline in oil prices, and the continued reliance on the importation of luxury goods plus the need to sustain economic development; there was a need for external borrowing by developing nations. The liberal measures taken by banks in the industrial nations in granting loans to the developing nations also helped in accumulating debts worth billions of dollars by these countries. Nigeria, being a developing nation was also caught in this web of international debt entrapment. In an attempt to turn-around the economy, the Shagari administration adopted some restrictive import control policies 2 which later became popularly known as "Austerity Measures" in 1982. Implementation of the policy became difficult due to the liberal attitude of the administration. Under the Buhari regime, emphasis was on the reduction of trade deficit through import restriction. Much was not achieved here either, partly due to severe pressure on the country's earnings brought about by the debt burden and the decline in credit worthiness of Nigeria which resulted in outright cancellations of credit lines to the country. The Babangida administration introduced Structural Adjustment Programme (SAP), the Second-tier Foreign Exchange Market (SFEM) and the Debt Conversion Programme (DCP) introduced in 1984 is still continued by the present administration. This study, which hinges on the programme was conducted with the aim of analysing the extent to which Nigeria's external debt obligation were reduced as a result of the operations of the programme. 3 The research found out that debt conversion programme alone cannot solve the nation's external debt problems, it can only complement other debt management strategies, such as debt rescheduling debt buy back and debt forgiveness.