The gap between Nigeria's foreign exchange reserves and the country's outstanding letters of credit (L/Cs) is closing.

In its latest endeavor to improve the foreign exchange situation, Nigeria's central bank has now abandoned a currency peg that several economists and businesses had blamed for worsening Africa's largest economy.

Plummeting reserves

Two years ago, Nigeria's foreign exchange reserves stood at around US$43 billion.

Reserves now stand at around US$27.3 billion, while L/Cs outstanding are put at around US$7 billion.

In response to this closing gap Nigeria's central bank has put restrictions on certain L/Cs, which is having a negative impact, particularly on manufacturers that need imported materials for their businesses.

Exchange rate unpegged

Central Bank of Nigeria governor, Godwin Emefiele, has now announced that the country's naira currency will trade at a market-determined rate beginning today.

The currency was previously pegged to an exchange rate of 197 naira to one US dollar.

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