Given the bitterness of the civil war, the restoration of peace and the reintegration of the Igbo into Nigerian life were remarkably rapid. Aiding the resumption of normalcy was a booming oil trade. At the time Nigeria was the fifth largest producer of petroleum in the world. Lagos the then capital was developed into an international city. Unfortunately, however, this period also saw a rapid increase in corruption and although the head of State himself, General Gowon, was never found complicit in the corrupt practices, he was often accused of turning a blind eye to the activities of his staff and cronies. Shortages of key commodities, crippling congestion in the ports, and demands for redistribution of wealth made the people dissatisfied.

On 1 October 1974, in flagrant contradiction to his earlier promises, Gowon declared that Nigeria would not be ready for civilian rule by 1976, and he announced that the handover date would be postponed indefinitely. His timing was poor: High prices, chronic shortages, growing corruption, and the failure of the government to address several regional issues had already created a restless mood. This provoked serious discontent within the army, and on 25 July 1975, while Gowon was attending an OAU summit in Kampala, a group of officers led by Brigadier Murtala Mohammed announced his overthrow. Gowon subsequently went into exile in the United Kingdom.

Now General Muhammed, he moved quickly to address issues that Gowon had avoided. He replaced corrupt state governors. He purged incompetent and corrupt members of the public services. He instigated a plan to move the national capital from industrial, coastal Lagos to neglected, interior Abuja. Civilian rule, he declared, would be restored by 1979, and he began a five-stage process of transition.

The reforms made General Muhammed made him extremely popular with many Nigerians. On February 13, 1976, he was assassinated in a coup attempt, but his administration remained in power. Although Murtala was killed during the attempted coup, Obasanjo escaped death as another officer's vehilce was mistaken for his. The low profile security policy adopted by General Murtala in guarding very important persons allowed the plotters easy access to their targets. The coup was foiled because the plotters missed Obasanjo and General Theophilus Danjuma, chief of army staff and de facto number three man in the country.

Former head of state General Gowon was implicated in the coup led by Lt. Col Buka Suka Dimka According to Dimka's confession, he met with Gowon in London, and obtained support from him for the coup. In addition, Dimka mentioned before his execution that the purpose of the coup was to re-install Gowon as head of state. As a result of the coup tribunal findings, Gowon was declared wanted by the Nigerian government, stripped of his rank in absentia and had his pension cut off. Gowon was finally pardoned along with the ex-Biafran President, Emeka Ojukwu by President Shehu Shagari.

General Muhammed's successor, Lieutenant General Olusegun Obasanjo, continued his reforms, including the move toward civilian rule. Obasanjo also created seven new states to help redistribute wealth and began a massive reform of local government. In 1977 he convened a constitutional assembly, which recommended replacing the British-style parliamentary system with an American-style presidential system of separate executive and legislative branches. To ensure that candidates would appeal to ethnic groups beyond their own, the president and vice president were required to win at least 25 percent of the vote in at least two-thirds of the 19 states. The new constitution took effect in 1979. The restructured administration was called Nigeria's Second Republic.