Dollar to Naira Black Market Rate Today, October 31, 2023
The black market exchange rate between the US dollar and the Nigerian naira has continued to fluctuate in recent weeks and months. As of October 31, 2023, the dollar was exchanging on the parallel market at an average of ₦1200 to $1, according to user comments on the website NgnRates.com.
The volatility in the black market rate can be attributed to several factors, including increased demand for dollars, reduced dollar supply, and general economic uncertainties. With Nigeria still being heavily reliant on imports, the demand for dollars has remained elevated even as the supply dwindles due to lower oil earnings.
On the black market, the dollar exchange rate reached a high of ₦1300 to $1 between October 23 and October 30, 2023 based on comments shared by users on NgnRates.com. This represents a 7.7% increase from the average rate of ₦1227.22 in the preceding 7 days between October 16 and October 23.
However, as of October 31, the average rate had dropped back to ₦1200, though some sellers were still quoting rates between ₦1200 and ₦1250 to buy a dollar on the parallel market. One user indicated they were selling dollars at ₦1200 while another quoted ₦1250 as their selling rate.
The volatility is an indication of the intense pressure being exerted on the naira, especially on the black market, by acute dollar shortage amid rising demand. With the gap between the official and parallel market rates now wider than ever, more individuals and businesses are turning to the black market for their dollar needs.
The Central Bank of Nigeria (CBN) has tried to close this gap by adjusting the official exchange rates and clamping down on aboki fx websites, black market traders, and bureaux de change operators perceived to be driving rates on the parallel market. However, these measures have failed to stabilize or unify the exchange rate.
As of October 31, the CBN’s official rates were:
- N435.67 to the dollar for Importers and Exporters
- N445 to the dollar for Bureau de Change Operators
- N460 to the dollar for Nigerians traveling overseas and for school fees payment abroad
This represents a major disparity from the ₦1200 to ₦1250 per dollar exchange rate on the black market. With the official avenues unable to meet the dollar demands, Nigerians are left with the more expensive black market option.
Demand for dollars is expected to remain high in the coming weeks and months. Apart from the usual needs for imports, forex for school fees payments abroad, overseas travel allowance, and business transactions will add to demand.
Dollar shortage will also persist due to declining foreign reserves and lower oil receipts. Nigeria’s foreign reserves have dropped below $40 billion, enough to cover just 7 months of imports. Oil production quotas by OPEC+ also continues to limit dollar inflows.
With both demand and supply factors unfavorable, the black market exchange rate is forecasted to remain under pressure. Some black market traders expect the rate could reach ₦1500 or more to a dollar before year-end 2023.
However, the CBN has reiterated its commitment to unifying exchange rates and improving dollar liquidity across the economy. The apex bank plans to aggressively drive dollar inflows into the economy and discourage frivolous demand. This might help moderate black market rates if successful.
The apex bank may also continue with periodic adjustments of the official rates while cracking down on black market operators to control speculative tendencies. But multiple exchange rates persist, along with acute dollar shortage, the allure and profitability of black market trading will be difficult to curb.
In the meantime, the volatile parallel market exchange rates have implications for the wider Nigerian economy. The pass-through effect on inflation typically means higher prices for imports, raw materials, and consumer goods. Depreciation pressure on the naira also impacts business costs, investment, government revenue, public debt, and overall economic performance.
But with the CBN adamant on defending the naira through its preferential rates for certain sectors, Nigeria remains susceptible to wider parallel market volatilities. The dollar demand-supply imbalance continues to exert pressure, leaving the average Nigerian without much choice but to buy dollars at inflated black market rates for imports, school fees, travel, etc.
To attract sustainable dollar inflows, Nigeria may need more productivity boosting and import substitution policies to reduce excessive demand for imports and stabilize its currency.Making the business environment more competitive and easing foreign exchange regulations can also improve dollar inflows.
Until then, the precarious dollar liquidity situation and multiple exchange rate practices will combine to make the naira more vulnerable to volatility, especially on the black market. Today’s parallel market rate may change quickly depending on speculative activities, dollar flows and CBN interventions.
But with the weak economic fundamentals, most black market participants do not envisage any major gains for the naira. The general consensus is that exchange rate volatility will persist on the parallel market where majority of Nigerians now obtain their dollar supplies.