Rate Of Naira To Dollar In Black Market
The Nigerian economy is heavily dependent on crude oil export. The country earns a significant portion of its revenue from oil export, which makes it vulnerable to external factors such as oil price fluctuations and global economic trends. One major factor that affects the Nigerian economy is the exchange rate of the Naira to the Dollar.
The Naira is the official currency of Nigeria, while the Dollar is the currency of the United States. The Nigerian Central Bank is responsible for setting the official exchange rate of the Naira to the Dollar, which is used for official transactions such as international trade, foreign investment, and government transactions. However, due to the limited availability of foreign exchange in the official market, many Nigerians resort to the black market to obtain foreign currency.
What is the Black Market?
The black market is an illegal market where goods and services are traded outside the official channels. In the case of foreign exchange, the black market refers to the exchange of currencies outside the official exchange rate. The black market exchange rate is usually higher than the official exchange rate, as the demand for foreign currency exceeds the supply available in the official market.
Factors that Affect the Rate of Naira to Dollar in the Black Market
Several factors influence the exchange rate of Naira to Dollar in the black market. Some of these factors include:
Oil Prices
Oil prices have a significant impact on the Nigerian economy and the exchange rate of Naira to Dollar. When oil prices are high, Nigeria earns more revenue, which leads to an increase in the supply of foreign exchange, and a decrease in the black market exchange rate. Conversely, when oil prices are low, the supply of foreign exchange decreases, leading to an increase in the black market exchange rate.
Foreign Investment
Foreign investment has a significant impact on the Nigerian economy and the exchange rate of Naira to Dollar. When foreign investors invest in Nigeria, they bring in foreign exchange, which helps to increase the supply of foreign exchange and reduce the black market exchange rate. However, when foreign investors withdraw their investments, the supply of foreign exchange decreases, leading to an increase in the black market exchange rate.
Inflation
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Inflation has a significant impact on the exchange rate of Naira to Dollar in the black market. When inflation is high, the value of the Naira decreases, leading to an increase in the black market exchange rate.
The Current Rate of Naira to Dollar in the Black Market
The current rate of Naira to Dollar in the black market is not fixed, but it is usually higher than the official exchange rate. As of August 2021, the black market exchange rate was around 1 USD to 515 NGN, while the official exchange rate was around 1 USD to 410 NGN.
The Impact of the Black Market on the Nigerian Economy
The black market has both positive and negative impacts on the Nigerian economy. On the positive side, the black market provides an alternative source of foreign exchange for Nigerians who cannot access foreign exchange in the official market. This helps to boost economic activities and reduce the impact of the limited availability of foreign exchange on businesses and individuals.
On the negative side, the black market promotes corruption, money laundering, and other illegal activities. It also distorts the true value of the Naira and creates uncertainty in the economy, which can discourage foreign investment and negatively impact the overall economic growth of the country.
Conclusion
The rate of Naira to Dollar in the black market is influenced by several factors such as oil prices, foreign investment, and inflation. The black market provides an alternative source of foreign exchange for Nigerians, but it also promotes illegal activities and creates uncertainty in the economy. The Nigerian government needs to address the factors that contribute to the limited availability of foreign exchange in the official market to reduce the dependence on the black market and promote economic growth.