Price Of Dollar To Naira In The Black Market
The Nigerian economy is heavily dependent on crude oil export, and as such, the value of the naira is tied to the price of crude oil. Since the global oil prices crashed in 2014, the value of the naira has been on a downward spiral, leading to a rise in the price of dollar to naira in the black market.
What is the Black Market?
The black market is an illegal and unofficial market where foreign currencies are bought and sold outside the official exchange rate. The black market is usually driven by the scarcity of foreign exchange and the high demand for foreign currencies.
In Nigeria, the official exchange rate is set by the Central Bank of Nigeria (CBN) and is currently at ₦411.63 per dollar. However, due to the scarcity of foreign exchange, the black market rate is much higher than the official exchange rate.
Factors Affecting the Price of Dollar to Naira in the Black Market
Several factors contribute to the rise and fall of the price of dollar to naira in the black market. Some of these factors include:
1. Scarcity of Foreign Exchange
The scarcity of foreign exchange is one of the major factors that affect the price of dollar to naira in the black market. When the demand for foreign exchange is high and the supply is low, the price of dollar to naira in the black market increases.
2. Economic Policies
The economic policies of the government can also affect the price of dollar to naira in the black market. For example, when the government imposes strict foreign exchange controls, it creates a scarcity of foreign exchange, leading to an increase in the price of dollar to naira in the black market.
3. Political Instability
Political instability can also affect the price of dollar to naira in the black market. When there is political unrest, investors tend to withdraw their investments, leading to a reduction in the supply of foreign exchange and a subsequent increase in the price of dollar to naira in the black market.
The Current Price of Dollar to Naira in the Black Market
As of August 2021, the price of dollar to naira in the black market is around ₦515 per dollar. This is significantly higher than the official exchange rate set by the Central Bank of Nigeria.
The high price of dollar to naira in the black market has led to an increase in the cost of living in Nigeria, as most goods and services are imported and paid for in foreign currency. This has made life difficult for the average Nigerian, who is struggling to make ends meet in a tough economic environment.
The Way Forward
To address the issue of the high price of dollar to naira in the black market, the Nigerian government needs to adopt policies that will increase the supply of foreign exchange and reduce the demand. Some of these policies include:
1. Diversification of the Economy
The Nigerian economy is heavily dependent on crude oil export, and as such, any fluctuations in the price of crude oil can have a devastating effect on the economy. To reduce the dependence on crude oil, the government needs to diversify the economy and promote other sectors like agriculture, manufacturing, and tourism.
2. Investment in Infrastructure
Investment in infrastructure like power, transportation, and telecommunications can attract foreign investments and boost the supply of foreign exchange. This will help to reduce the scarcity of foreign exchange and subsequently reduce the price of dollar to naira in the black market.
3. Flexible Exchange Rate Policy
The Nigerian government needs to adopt a flexible exchange rate policy that will allow the market to determine the exchange rate. This will help to reduce the gap between the official exchange rate and the black market rate, and also reduce the demand for foreign exchange in the black market.
Conclusion
The high price of dollar to naira in the black market is a major challenge facing the Nigerian economy. To address this issue, the Nigerian government needs to adopt policies that will increase the supply of foreign exchange and reduce the demand.