Impact of Black Market Exchange Activities on Foreign Exchange Rate in Nigeria

The term “black market exchange activities” refers to the unregulated purchase and sale of foreign currency. There is a sizeable underground market for foreign currency in Nigeria, with some estimates putting its share at as high as 70% of total FX trades. The purchasing and selling of foreign currency outside of authorized channels is known as “black market exchange.” Money laundering, smuggling illicit funds, and other similar activities fall under this category. For a long time, black market exchange operations in Nigeria have been a major problem since so many people there need to use them to get their hands on foreign cash. However, the country’s foreign currency rate may be significantly impacted by such actions, leading to instability and economic difficulties.

Nigeria’s foreign exchange rate is complicated and multidimensional due to the effect of black market exchange activity. On the one hand, the black market is a viable option for obtaining foreign money for those who cannot do so legally. Investment and economic growth may benefit from this.

However, the black market can also cause the Nigerian naira to lose value. This is because an increase in the black market price of foreign money compared to the naira might cause the value of the Naira to fall. Possible negative effects on the Nigerian economy include higher inflation and less consumer purchasing power.

Black market exchange operations’ effect on Nigeria’s foreign exchange rate is multifaceted and calls for in-depth examination. Access to foreign cash is one area where the black market may be helpful, but it also has the potential to have detrimental effects on the Nigerian economy.