Nigeria’s economy is highly dependent on crude oil, which constitutes a major source of the country’s foreign exchange earnings and government revenue. As a result, the sharp decline in crude oil prices has adversely affected Nigeria’s foreign earnings and reserves, the value of the Naira against major world currencies, the availability of foreign exchange in Nigeria and contributed to widening of the disparity between the exchange rates in the official and the parallel foreign exchange markets.
In a bid to control the decline in the country’s foreign reserves, the Central Bank of Nigeria (CBN) has adopted a number of measures to manage access to the official foreign exchange market that has, traditionally, been subsidised by the federal government of Nigeria. These changes portend well for private equity and other investments as foreign investors, following the recent developments, can now convert any capital (brought into Nigeria for investment) into Naira at a market-determined rather than a fixed CBN determined exchange rate, which has been the subject of recent criticism.