How Fear is Affecting Dollar Value in Nigeria's Black Market

How Fear is Affecting Dollar Value in Nigeria's Black Market

  • Naira appreciation has been linked to the Central Bank of Nigeria's plan to increase the amount of foreign exchange available in the Nigerian market
  • The financial regulator committed to boosting dollar availability following scarcity of forex which has strengthened foreign currency within the country
  • Naira has been depreciating against the dollar and pound for weeks, before appreciating recently in the black market and official window

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The reason the dollar lost its value against the naira on Thursday after a long period of weakening the Nigerian currency has been attributed to an upcoming action of the Central Bank of Nigeria.

Aminu Gwadabe, President, Association of Bureaux De Change Operators of Nigeria (ABCON), had stated last week that the CBN has pledged to increase the number of foreign exchanges in the hands of over 5,000 operators.

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This expectation had begun to drag the value of the dollar down, pushing the bureau de change operators and the black market to sell off their foreign currency to avoid holding a weak dollar.

Godwin Emefiele's Central Bank is planning on increase foreign exchange liquidity in the forex market
Central Bank of Nigeria governor, Godwin Emefiele during a press conference. Photo: PHILIP OJISUA/AFP
Source: Getty Images

Impact of CBN's action

Pumping the market with forex will increase the availability of dollar and the others, evaporating the scarcity that has hiked the value of those in circulation.

Legit.ng had reported that a dollar sold for N493 in late Thursday, while the pound went for N710 during the same period - both foreign currency depreciated in the parallel market, while the dollar was down in the Investors and Exporters window.

Since the CBN adopted the NAFEX as its official rate, the naira has been mostly weakened against the forex. The scarcity, which had been supporting the rise of the western notes, was described by Gwadabe as artificial prior to the adoption.

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Dollar and pound depreciated against naira at black market, NAFEX

Meanwhile, Legit.ng had previously reported that the World Bank has said it won't be helping El Salvador with its bitcoin integration as official currency.

El Salvador had requested an assistant on the cryptocurrency implementation following a law passed by the country's lawmakers to make digital currency legal.

But World Bank said due to the environmental impact of bitcoin, it won't be able to offer the support the Central American country is asking for.

Source: Legit Newspaper

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