Nigerians are perplexed and confused on why the US Dollar to Naira exchange rate has continued to rise. While economy experts have tipped rising inflation, international trade conditions, rising debts, speculators and others as factors influencing foreign exchange rate, to many these factors remain economic jargons.
Surprisely, the situation has remained unabated as the exchange rate for a dollar to naira at Lagos Parallel Market (Black Market) and Wuse Zone 4 black market players buy a dollar for N585 and sell at N600 on Tuesday May 17th 2022 according to sources at Bureau De Change (BDC).
However, it is pertinent to note that the Central Bank of Nigeria (CBN) does not recognize the parallel market (black market), as it has directed individuals who want to engage in Forex to approach their respective banks.
CBN sells at 415.25992 Nigerian Nairas to 1US$.
Checks by Nigerian Newssphere revealed that Nigerians do not buy Dollar at this rate.
Recall that months back, the Central Bank of Nigeria has accused the Abokifx, a website that collates the black market exchange rates of naira, of carrying out an “illegal activity that undermines the economy”.
The CBN governor, Godwin Emefiele, said the publisher of platform, Oniwinde Adedotun, was involved in “illegal forex trading”.
Meanwhile, Emefiele has faced serious criticisms for delving into Politics following his ambition to contest Nigeria’s presidential election come 2023.
Many have condemned the move calling for his resignation as CBN governor.
Factors Influencing Foreign Exchange Rates
Here are some of the causes of the dwindling dollar to naira exchange rate.
Inflation Rates: It is well known that inflation directly impacts black market exchange rates. If the Nigerian economy can be stabilized and inflation is brought under control, the naira will benefit; however, if the naira continues to fall, it may indicate that food and other necessities are becoming more expensive daily.
Interest Rates: Another tool to keep an eye on is interest rates. If the interest rate at which banks lend money rises, it would harm the economy, causing it to contract and, as a result, the value of the naira to fall.
Government Debt: National debt can impact investor confidence and, as a result, the influx of funds into the economy. If inflows are high, the naira exchange rate will rise in favour of the naira.
Speculators: Speculators frequently impact the naira-to-dollar exchange rate. They stockpile money in anticipation of a gain, causing the naira to plummet even lower.
Conditions of Trade: Favorable trade terms will lead to an increase in the value of the naira to the dollar, although Nigeria is currently experiencing a trade deficit. Everything comes from China, India, and the majority of Asian countries.