Black Market Exchange Rate Of Dollar To Naira
The exchange rate between the United States dollar (USD) and the Nigerian naira (NGN) has been a topic of concern for many Nigerians for several years. The official exchange rate of the USD to NGN is currently around 1 USD to 410 NGN, but the black market exchange rate is significantly higher. This article will discuss the black market exchange rate of the USD to NGN, how it affects Nigerians, and the factors that contribute to its fluctuation.
What is the Black Market Exchange Rate?
The black market exchange rate is the unofficial exchange rate used by individuals and businesses who cannot access the official exchange rate. It is also known as the parallel market rate, and it is usually higher than the official rate. The black market exchange rate is determined by supply and demand forces in the market. When the demand for USD is high and the supply is low, the price of USD in the black market will increase, and vice versa.
Why is the Black Market Exchange Rate Higher?
One of the main reasons why the black market exchange rate is higher than the official exchange rate is the dependence of Nigeria's economy on oil exports. Nigeria is heavily reliant on oil exports, which account for more than 90% of the country's foreign exchange earnings. When the price of oil falls, the country's foreign exchange earnings decrease, leading to a shortage of USD in the official market. This shortage, in turn, leads to an increase in the black market exchange rate.
How Does the Black Market Exchange Rate Affect Nigerians?
The black market exchange rate affects Nigerians in several ways. Firstly, it affects the cost of imported goods, as most of these goods are purchased in USD. When the black market exchange rate is high, the cost of imported goods will be more expensive, leading to inflation. Secondly, it affects the value of the naira. When the black market exchange rate is high, the value of the naira decreases, making it more difficult for Nigerians to purchase goods and services. Lastly, it affects the country's economy, as it discourages foreign investment and leads to a decrease in foreign reserves.
Factors that Contribute to the Fluctuation of the Black Market Exchange Rate
Several factors contribute to the fluctuation of the black market exchange rate. One of the major factors is the country's economic policies. When the government implements policies that are not favourable to businesses, the demand for USD increases, leading to an increase in the black market exchange rate. The political situation in the country also affects the black market exchange rate. When there is political instability, foreign investors are likely to pull out their investments, leading to a decrease in the supply of USD in the official market.
Conclusion
The black market exchange rate of the USD to NGN is a major concern for Nigerians. It affects the cost of living and the country's economy. While the official exchange rate may not be accessible to everyone, it is important for the government to implement policies that will stabilise the exchange rate and encourage foreign investment. This will reduce the dependence of the economy on oil exports and promote economic growth.