As a major oil exporter, Nigeria lived prosperously on a rapidly rising flow of foreign earnings through the 1970s. Although there were some troubling side effects of that prosperity, they seemed manageable at the time. The country's strong currency raised Nigerians' purchasing power and undercut -- by a process that Americans have recently come to understand -- Nigeria's industry and agriculture. Local production had trouble competing with imports despite much protectionist help from the government.

The oil revenues peaked in 1980, then started to fall. Anxious to maintain its recent standard of living, Nigeria began to borrow abroad. Under Shehu Shagari, the elected civilian president who had replaced the previous military rulers, the government acquired substantial debts. But President Shagari was reelected in the summer of 1983 for another four years. He turned to the International Monetary Fund for advice; the IMF suggested, among other things, dropping the exchange rate of the now overvalued currency. Mr. Shagari announced an austerity program but, at the end of 1983, was deposed by a military coup that pledged itself to end "the crisis of confidence now afflicting our nation."

That, unfortunately, is not what happened. Maj. Gen. Mohammed Buhari, who led the new government, made a mistake that many other governments have made over the years: he confused the defense of an overvalued currency with patriotism, the flag and national pride. Unemployment spread in the cities, and, because agricultural capacity had shrunk, food shortages began to occur. Imports were no longer an easy alternative, for foreign loans became hard to find and more costly. Oil revenues continued to drop and currently are probably little more than half the "level hey reached five years ago. The general told the country to expect even more drastic austerity in the coming three years.

That led to the coup this week by other military officers under Maj. Gen. Ibrahim Babangida. Are Gen. Babangida's chances any better than his predecessor's? Very possibly. If his government is prepared to compromise with the IMF and the other lenders, they are prepared to compromise with him.

But no country has been more severely whipsawed by fluctuating oil prices than Nigeria. In a country with a large and poor population, it's difficult to keep rising oil revenues funneled into long-term development and investment. And when revenues fall, it's even harder to prevent a sharp drop in the standard of living. What Nigeria needs is a better kind of economic shock absorber than it, or any of the low-income countries, has yet been able to devise.