Exchange Rate Naira To Dollar Parallel Market Today
As the world continues to grapple with the COVID-19 pandemic, global economies have been greatly impacted. Nigeria, like many other countries, has not been spared from the economic effects of the pandemic. One of the areas that have been greatly affected is the exchange rate of the Naira to the Dollar in the parallel market. This article seeks to explore the current exchange rate and factors that contribute to its fluctuations.
What is the Parallel Market?
The parallel market, also known as the black market or unofficial market, refers to the trading of currencies outside the official channels. It is an illegal market where currencies are traded at rates that are not recognized by the government or central bank.
The Current Exchange Rate
As of August 2021, the exchange rate of the Naira to the Dollar in the parallel market is around 500 Naira to 1 Dollar. This is a significant drop from the rate of around 360 Naira to 1 Dollar in 2019 before the pandemic hit. The exchange rate has been fluctuating in recent times, with some days recording higher rates.
Factors Affecting the Exchange Rate
Several factors contribute to the fluctuations in the exchange rate of the Naira to the Dollar in the parallel market. Some of these factors include:
Oil Prices
Nigeria is heavily dependent on crude oil exports to generate revenue. When oil prices drop, the country's revenue decreases, leading to a shortage of foreign currency. This shortage leads to an increase in demand for foreign currency, which causes the exchange rate to rise.
Foreign Exchange Reserves
The level of Nigeria's foreign exchange reserves also affects the exchange rate. When the reserves are high, it means there is enough foreign currency to meet demand, and the exchange rate remains stable. However, when the reserves are low, there is a shortage of foreign currency, leading to an increase in demand and a rise in the exchange rate.
Inflation
Inflation is another factor that affects the exchange rate of the Naira to the Dollar. When the inflation rate is high, the value of the Naira decreases, leading to a decrease in the exchange rate. This is because inflation erodes the purchasing power of the currency.
Government Policies
The policies implemented by the government and central bank also affect the exchange rate. For example, if the government restricts the amount of foreign currency that can be purchased, it leads to a decrease in supply, causing the exchange rate to rise.
Conclusion
The exchange rate of the Naira to the Dollar in the parallel market is currently experiencing fluctuations due to several factors such as oil prices, foreign exchange reserves, inflation, and government policies. It is important to note that the parallel market is illegal and not recognized by the government or central bank. Therefore, individuals and businesses are advised to use official channels when trading currencies.