You see, there is always a move by the Central Bank to end or reduce the activities of parallel market operators.
Unfortunately, each time people are not able to access foreign exchange at the official market they quickly turn to the black market.
This simple reason among many others, is why the CBN may not be able to do much about the black-market prominence.
Even though the black market exchange rate is far from static, and it constantly fluctuates, it is regularly patronised.
Have You Read: Ban Use Of Dollars In Nigeria – Ned Nwoko Tells Senate
Indeed, many would say that the parallel market became prominent or a go-to for those in urgent need of Forex because of scarcity.
When individuals and organisations are not able to access Forex in the official market, they turn to the nearest available option, the black market.
Scarcity, restrictions, and regulatory challenges are the major factors giving the black market prominence in the exchange market.
Here are some other factors responsible for the prominence of this foreign exchange market.
1. Supply And Demand Dynamics
As demand surges or wanes, the exchange rates respond.
This is because dynamics at play between demand and supply for US dollars and Nigerian Naira plays a pivotal role in determining the exchange rate.
2. Economic Variables
Inflation, economic policies, and so many other variables contribute to the prominence gained by the black market.
These variables introduce an element of volatility, impacting the strength of the naira in the official marketplace.
3. Parallel Market Premium
The parallel market is consistently surpassing the official rate, indicating a weaker naira in the domain.
You May Also Like: Official Market: Naira Exchange Rate Crosses ₦1,000 Benchmark
The differences between these are termed parallel market premiums, which serve as a gauge for confidence in the naira and the CBN policies.
