Dollar To Naira Exchange Rate Black Market History
For many years, the exchange rate between the US Dollar and Nigerian Naira has been a topic of concern for Nigerian citizens, businesses, and the government. The exchange rate has been unstable, and the black market has played a significant role in determining the exchange rate. This article will explore the history of the dollar to naira exchange rate on the black market.
The Beginning
The Central Bank of Nigeria (CBN) was established in 1958, and since then, it has been responsible for regulating the exchange rate of the Naira. Initially, the exchange rate was fixed at 1 Naira to 1 USD. However, the exchange rate started to fluctuate in the 1980s when Nigeria's oil revenue declined, and the country experienced an economic crisis.
The Black Market Emerges
As the official exchange rate became increasingly unreliable, the black market emerged as a necessary alternative for individuals and businesses that needed to exchange currencies. The black market offered higher exchange rates for the dollar, making it more attractive to those who needed foreign currency.
The Rise of the Black Market
From the 1980s to the early 2000s, the black market became the primary source of foreign currency for many Nigerians. The CBN tried to control the black market by imposing strict regulations on the exchange of foreign currency. However, these regulations were largely ineffective, and the black market continued to thrive.
The Impact of Political Instability
Nigeria has experienced periods of political instability, and this has had a significant impact on the exchange rate on the black market. For example, during the military regime in the 1990s, the exchange rate on the black market was significantly higher than the official exchange rate. Political instability continues to affect the exchange rate in Nigeria today.
The Impact of Oil Prices
Nigeria is heavily dependent on oil exports, and fluctuations in oil prices have a significant impact on the exchange rate. When oil prices are high, the exchange rate tends to be more stable, and the black market is less active. However, when oil prices are low, the exchange rate becomes more volatile, and the black market becomes more active.
The Government's Efforts to Control the Black Market
The Nigerian government has made several attempts to control the black market and stabilize the exchange rate. In 2016, the CBN introduced a new foreign exchange policy that was aimed at improving the availability of foreign currency and reducing the demand for forex on the black market. The policy was largely successful in reducing the exchange rate on the black market.
The Current State of the Black Market
As of 2021, the exchange rate on the black market is significantly higher than the official exchange rate. The official exchange rate is around 380 Naira to 1 USD, while the black market exchange rate can be as high as 500 Naira to 1 USD.
The Future of the Black Market
The future of the black market in Nigeria is uncertain. While the government has made efforts to control the black market, it is likely that it will continue to exist as long as there is a significant demand for foreign currency in the country. However, with the increasing availability of forex and the growth of the Nigerian economy, it is possible that the black market will become less relevant in the future.
Conclusion
The dollar to naira exchange rate on the black market has been a significant concern for Nigerians for many years. The black market emerged as a necessary alternative to the unreliable official exchange rate, and it has continued to thrive despite the government's efforts to control it. However, with the increasing availability of forex and the growth of the Nigerian economy, it is possible that the black market will become less relevant in the future.