It’s no longer news that Naira is fast depreciating against Dollar, as price is going higher day by day. The question begging for answer is whether the value of Naira against Dollar is of the Official Market or Parallel market (black or street market).
It may interest you to know that the Official Market rate of Naira is One Hundred and Ninety-Seven Naira (197) against Two Hundred and fifty naira (250) in Parallel Market.
The rise of dollar rate in the black-market is as a result of shortage of supply from the Bureau De Change (BDC) who buys officially to fund the black market.
The introduction of Biometric Verification Number (BVN) into BDC transaction with Central Bank of Nigeria (CBN) and Deposit Money Banks (DMBs) has tremendously reduce the numbers of BDCs comely to the weekly biding at the Apex Bank which automatically result to shortage of Dollars at the parallel market.
More so, the rate of dollar in black-market doesn’t affect people with legitimate business transactions as exchange is based on official market rate. A Naira card is swipe for the official market exchange rate though this is subjected to autonomous market.
Have you ever wonder why most people lament over high dollar rate in black-market? This is purely in the interest of people with love for luxury lives, and Naira depreciation in black market doesn’t have any effect on common masses.
Apart from the introduction of BVN which has evidently affected the service of BDC, anybody who likes to go abroad for holiday, buying fairly used cars or send their wards to school abroad are always in desperate need for dollars in exchange for such luxury, hence high in dollar demand against supply.
The activities of the parallel market boom mainly to the law of demand and supply, there are high demand for dollars by people whose main purpose is to fund their luxury life style and little supply from the parallel due to shortage flow from the BDCs, so it is logical for dollar price to rise.
There are other ways to fund such activities than looking for physical dollars e.g. PayPal account, moneygram (you can now send money aboard through them now from Nigeria) etc.
However, Banks decision to limit daily withdrawer from ATM card abroad is to balance the law of demand and supply of dollar against naira. This is a welcome idea but been frowned at by people with illegitimate bank transaction or businesses.
And it would be great if CBN can discontinue Deposit Money Bank (DMBs) from payment of Education and upkeep allowance abroad and make room for people that need fund for eligible transaction. With above analysis, it’s obvious that there is cause for alarm as Nigerians need to abide to money policy and adjust yearns for luxuries.
-Andra Omogbolahan (Financial Analyst)