The Central Bank of Nigeria (CBN) has identified the real reason why the Naira is in continuous free fall against the dollar. The Apex Bank fingers the diversion of diaspora remittances to the parallel market, often referred to as black market as the root cause behind the Naira depreciation and free fall.
CBN acting governor, Mr Folashodun Shonubi, made the revelation while delivering a lecture titled ‘Diaspora Remittances and Nigeria Economic Development’ at the National Institute for Security Studies in Abuja.
VERY SERIAL reported yesterday and later this morning that the naira tumbled to an all-time low of N945 to a US dollar and later fell to N950/$ at the parallel/black market as at close of business on Thursday 10 weeks after the currency’s float in the open market.
As of August 11th, 2023, the dollar to naira exchange rate is 1 USD to 950 NGN at the parallel market popularly called black market in Lagos and Abuja. This implies that for every one US dollar, you can exchange it for ₦950. Bureaux De Change (BDC) operators, popularly known as ‘abokis’ in Ikeja, Lagos, was quoted as saying the buying rate of the greenback is N940 while the selling price is N950 per dollar, leaving a N10 profit margin.
Naira Exchanges at N781 at the investors and exporters (I&E) window
Meanwhile, at the investors and exporters (I&E) window, the naira appreciated slightly by 0.13 percent to close at N781.34/$.
Speaking at the event, Shonubi said a lot of diaspora remittances arrived in Nigeria in dollars and end up in the parallel market without being officially documented.
“With those remittances, the dollars have come in, we know the dollars have come in but we don’t see them in the official system. So, they must be going somewhere and somewhere,” Shonubi said.
“And the challenge with the black market, unofficial market or parallel market or whatever name you want to call it, it is not regulated, and it becomes an easy place to have criminal activities.
“We investigate bankers, not just bankers, anybody who has committed an offense, the first thing they want to do is to run to the black markets, change it to the dollars because it is less money to carry around.
Shonubi said the amount of inflows coming through many unapproved channels and eventually ending up in the parallel market contributed significantly to Nigeria’s foreign exchange (FX) crisis.
How Black Market is Affecting Dollar To Naira Exchange Rate And Creating Free Fall of the Naira- CBN Acting Governor
“Some of the funding in the black markets are actually from diaspora remittances. That’s why it important we need to know a lot of what’s going on there.
“We can’t play the sentiment game. If we don’t understand the dynamics, we usually go with the literature which does not necessarily work for us.”
“We talk about black markets, which also create their own problems. Management of the foreign exchange market and the efficacy of our policies to manage the exchange rate becomes difficult due to the insignificance of our diaspora remittances which are going to other markets,” the CBN boss said.
“Today, someone called me privately and said that this thing (naira) has gone up to some levels in the black markets, my question was, what do you want me to do? Do I operate in the black markets? I don’t know the basis of pricing in the black markets.
“We can’t do without diaspora remittances. For many countries, that’s their main source of income.”
