The Nigerian foreign exchange market has in recent times been facing challenges as the naira has lost close to 40 per cent in 18 months.
Specifically, the naira has lost so much of its value on the streets even as the gap between the official exchange rate and the parallel market has continued to widen beyond control.
Between December 2014 and June 2016, the value of the naira depreciated by nearly 40 per cent at the Central Bank of Nigeria, CBN window from N165 to the dollar which it was, at the end of December 2014.
The depreciation at the parallel market has been more alarming.
Yet, the pressure on the foreign exchange market is not being helped by the declining value of Nigeria’s major source of foreign exchange, oil, at the international market.
The price of crude has been yo-yoing, thereby impacting heavily on Nigeria’s revenue and foreign exchange reserve, which has so far declined by 18.6 per cent to $28.06 billion from the $34.46 billion it was at the beginning of 2015.
In trying to stem the problem posed by the foreign exchange challenge, the CBN has chosen the path of capital control by embarking on measures to reduce the rate of foreign exchange outflow from the reserves.
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