Exchange Rate Dollar To Naira In Parallel Market
The exchange rate of the US dollar to Nigerian Naira in the parallel market has been a topic of concern for many Nigerians. The parallel market, also known as the black market, refers to the unofficial exchange rate market where foreign currencies are traded without the regulation of the Central Bank of Nigeria (CBN).
Many factors influence the exchange rate of the dollar to Naira in the parallel market. The demand and supply of dollars, inflation rate, economic policies, and political instability are some of the significant factors that affect the exchange rate.
Demand and Supply of Dollars
The demand for dollars in Nigeria is high due to the country's dependence on imports. Nigeria imports most of its consumable goods, including petroleum products, electronics, and food items. The supply of dollars, on the other hand, is low due to the country's low export rate. This leads to a scarcity of dollars in the market, which drives up the exchange rate.
Inflation Rate
Inflation is the rate at which the general price level of goods and services in an economy increases over time. When the inflation rate is high, the value of the currency decreases. Nigeria has a high inflation rate, which affects the exchange rate of the dollar to Naira. The higher the inflation rate, the lower the value of the Naira, which leads to a high exchange rate.
Economic Policies
The economic policies of the government also influence the exchange rate of the dollar to Naira in the parallel market. When the government implements policies that encourage foreign investors and boost export, the supply of dollars increases, and the exchange rate decreases. However, when the government introduces policies that discourage foreign investors, the supply of dollars reduces, and the exchange rate increases.
Political Instability
Political instability affects the exchange rate of the dollar to Naira in the parallel market. When there is political unrest in the country, foreign investors are hesitant to invest, and the supply of dollars reduces. This leads to a high exchange rate. However, when there is political stability, foreign investors are more willing to invest, and the supply of dollars increases, leading to a lower exchange rate.
The Current Exchange Rate of Dollar to Naira in the Parallel Market
As of August 2021, the exchange rate of the dollar to Naira in the parallel market is around 1 USD to 525 NGN. This means that to get one US dollar, you need to pay 525 Naira in the parallel market. However, it is essential to note that the exchange rate fluctuates daily due to the factors mentioned earlier.
Conclusion
The exchange rate of the US dollar to Naira in the parallel market is influenced by several factors, including the demand and supply of dollars, inflation rate, economic policies, and political instability. It is crucial to keep an eye on these factors to understand the exchange rate trend in the parallel market.