Price Of Dollar To Naira In Parallel Market
The Nigerian Naira is the official currency of Nigeria, while the United States Dollar is the official currency of the United States of America. However, due to several factors such as inflation, economic downturn, and political instability, the exchange rate between the two currencies has been fluctuating in recent times. This article aims to explore the current price of dollar to Naira in the parallel market and the reasons behind the fluctuations.
What Is The Parallel Market?
The parallel market, also known as the black market, is an unofficial market where goods and services are sold outside the government's control. In Nigeria, the parallel market is commonly used to refer to the illegal trading of foreign currencies such as the US Dollar, Euro, and British Pound Sterling.
Factors Affecting The Price Of Dollar To Naira In The Parallel Market
Several factors are responsible for the fluctuations in the exchange rate between the US Dollar and Nigerian Naira in the parallel market. Some of these factors include:
- Inflation: High inflation rates in Nigeria reduce the value of the Naira, leading to a higher exchange rate in the parallel market.
- Political instability: Political unrest and insecurity in Nigeria scare away foreign investors, leading to a decrease in the demand for Naira and an increase in the exchange rate.
- Oil prices: Nigeria heavily relies on its oil exports for revenue. The decline in oil prices leads to a decrease in foreign exchange earnings, leading to a decrease in the value of the Naira.
- Foreign reserves: The amount of foreign currency reserves held by Nigeria's central bank affects the exchange rate. When the reserves are low, there is a higher demand for foreign currency leading to a higher exchange rate.
Current Price Of Dollar To Naira In The Parallel Market
As of July 2021, the price of the US Dollar to Nigerian Naira in the parallel market ranges between ₦500 to ₦505 to 1 US Dollar. However, the exchange rate is highly unstable and subject to sudden fluctuations due to the factors mentioned above.
Effects Of High Exchange Rate On The Nigerian Economy
The high exchange rate of the US Dollar to Nigerian Naira in the parallel market has several negative effects on the Nigerian economy. Some of these effects include:
- Inflation: A high exchange rate leads to an increase in the cost of imported goods, leading to high inflation rates.
- Reduced foreign investment: Foreign investors are discouraged from investing in Nigeria due to the high exchange rate and economic instability, leading to reduced economic growth.
- Decreased purchasing power: The high exchange rate reduces the purchasing power of Nigerians, leading to a decrease in their standard of living.
Conclusion
The exchange rate between the US Dollar and Nigerian Naira in the parallel market is highly unstable and subject to sudden fluctuations. The factors responsible for the fluctuations include inflation, political instability, oil prices, and foreign reserves. The high exchange rate has several negative effects on the Nigerian economy such as inflation, reduced foreign investment, and decreased purchasing power. Therefore, the Nigerian government needs to take measures to stabilize the exchange rate and promote economic growth.