On Sunday, September 1, 2024, the exchange rate for the US dollar against the Nigerian naira soared to unprecedented levels.

This increase occurred in Lagos’ parallel market, often called the black market.

Sources within the Bureau De Change (BDC) revealed that buyers purchased the dollar for ₦1,640 and sold it for ₦1,650.

Dollar Dilemma: Why Nigerians Choose The Black Market

The Central Bank of Nigeria (CBN) plays a crucial role in the country’s financial system.

It sets official exchange rates and oversees foreign exchange transactions.

However, despite the CBN’s efforts to maintain control over the foreign exchange market, many Nigerians still turn to the parallel market.

This market, commonly known as the black market, is where they fulfill their currency exchange needs.

This market, although not officially recognised by the CBN, has become an essential part of the country’s economic landscape.

The CBN has consistently advised individuals and businesses to avoid the black market.

Instead, it recommends conducting their foreign exchange transactions through official channels, specifically through their respective banks.

The central bank emphasised that using official channels ensures transparency, stability, and compliance with regulatory standards.

However, many people find the black market more accessible and convenient, especially when official channels cannot meet the high demand for foreign currency.

CBN Vs Black Market

To understand the difference between these two markets, let’s look at the current exchange rates for the US dollar against the Nigerian naira.

Read Also: Naira Drops 35.53% Against Dollar In 3 Months – CBN

On the black market, people currently buy the dollar for ₦1,640 and sell it for ₦1,650.

These rates reflect the demand and supply dynamics in an unofficial setting.

Prices can fluctuate rapidly due to various factors.

These factors include economic uncertainties, government policies, and even speculation.

In contrast, the CBN controls and sets the official rates to stabilize the economy.

As of now, the CBN’s official rate for buying dollars stands at ₦1,597.

The selling rate is ₦1,598.

These rates are generally lower than those in the black market, making official transactions more favorable for those who can access them.

However, the reality is that the official exchange rates may not always be available to everyone.

Due to the limited availability of foreign currency in official channels, many people and businesses turn to the black market, despite its higher rates.

This creates a significant gap between the official rates set by the CBN and the rates in the parallel market.

It’s also essential to recognize that exchange rates can vary significantly depending on the location and the vendor.

In the black market, vendors do not standardize these rates, so the price you pay or receive for dollars can differ from one place to another.

This variability adds another layer of complexity for those who rely on the black market for their foreign exchange needs.

In conclusion, while the CBN continues to push for transactions through official channels, the parallel market remains a significant part of Nigeria’s economy.

Anyone involved in foreign exchange transactions must understand the differences between these markets and their exchange rates.