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I don’t know about the situation in Nigeria. How come the black market rate (740) is so much higher than the “officia” markets (450)? Are there rules and regul

I don’t know about the situation in Nigeria. How come the black market rate (740) is so much higher than the “officia” markets (450)? Are there rules and regulations preventing access to the official forex markets?

churchill 4y ago
The government printed a lot of Nairas starting 2020 (COVID) when oil revenues dried up. The Naira's value plunged against the dollar. The Central Bank still insists the Naira is worth around 453/$1 while the free market insists it's much worse. So, the Central Bank continues to advertise N453/$1 but you can't swap your Nairas to dollars - only at black (i.e., free) market dealers who will give you the true market rate.
- decremental 4y ago
  Black market currency dealers. Never thought I'd hear something like that.
  - churchill 4y ago
    Yes, price controls often do a "good" job of causing shortages. So, an alternative market appears to fill the need.
  - terafo 4y ago
    It isn't that uncommon in countries with relatively high rate of inflation. For example in Ukraine government set some strict monetary controls and it's not really possible to get USD in cash form from official exchanges.
  - timr 4y ago
    All currency dealers are "black market" [1] -- the only difference is that in some countries, there's a "white market" that bears no resemblance to reality. Come to think of it, that's true of all "black markets". The only thing that makes a market "black" is the existence of some ridiculous official alternative. [1] For example: when I land in Japan, I don't get Yen from the JCB -- I get it from a private entity who sells it to me for dollars, usually at a worse than officially stated exchange rate. The Travelex booth at the airport is literally a private market for cash. When I swipe my credit card in a foreign country, the intermediary banks are more than happy to sell me currency, on the spot, for a small fee.
  - ptero 4y ago
    This is very common in the developing world. As governments print money and cause high inflation they want to prevent, or at least significantly delay, citizens exchanging it for a more stable option. So, the governments add friction (limits, KYC equivalents or outright bans) and offer exchanges with less friction at a much lower rate. Check Argentina -- their "blue rate", used by hotels and other cash-based businesses on site, is often twice as favorable as the official rate that you get with plastic.
  - dkjaudyeqooe 4y ago
    That's what they're called, but typically they're the only real and free market and thus have real prices. If a black market exists, that means the "official" markets are corrupt.
  - waterside81 4y ago
    Argentina is littered with them. Walk down Florida Street (ironically named) in Buenos Aires and hear "cambio, cambio, cambio" being yelled out constantly.
  - NikolaNovak 4y ago
    Fascinating,but understandable - I was born in ex-Yugoslavia and went through the civil war there so there are many things I take for fully granted that my (Canadian born) wife cannot imagine, from try hyperinflation to various black markets, bribery and corruption :)
churchill 4y ago
Oh, in case you're wondering - all the channels to arbitrage between both rates & become a billionaire overnight are effectively closed.
- tw98521358 4y ago
  For most people.
akomtu 4y ago
Black market rate means that you go to a subway station, locate a sketchy "banker" and exchange some currency. Rules and regulation apply only above the ground level. The alternative is going to the bank, waiting 2 hours in a line, and getting half of what that dude would've offered you, because the central bank decided that its currency is strong and should be valued that much.

churchill 4y ago

The government printed a lot of Nairas starting 2020 (COVID) when oil revenues dried up. The Naira's value plunged against the dollar. The Central Bank still insists the Naira is worth around 453/$1 while the free market insists it's much worse. So, the Central Bank continues to advertise N453/$1 but you can't swap your Nairas to dollars - only at black (i.e., free) market dealers who will give you the true market rate.

decremental 4y ago
Black market currency dealers. Never thought I'd hear something like that.
- churchill 4y ago
  Yes, price controls often do a "good" job of causing shortages. So, an alternative market appears to fill the need.
- terafo 4y ago
  It isn't that uncommon in countries with relatively high rate of inflation. For example in Ukraine government set some strict monetary controls and it's not really possible to get USD in cash form from official exchanges.
- timr 4y ago
  All currency dealers are "black market" [1] -- the only difference is that in some countries, there's a "white market" that bears no resemblance to reality. Come to think of it, that's true of all "black markets". The only thing that makes a market "black" is the existence of some ridiculous official alternative. [1] For example: when I land in Japan, I don't get Yen from the JCB -- I get it from a private entity who sells it to me for dollars, usually at a worse than officially stated exchange rate. The Travelex booth at the airport is literally a private market for cash. When I swipe my credit card in a foreign country, the intermediary banks are more than happy to sell me currency, on the spot, for a small fee.
- ptero 4y ago
  This is very common in the developing world. As governments print money and cause high inflation they want to prevent, or at least significantly delay, citizens exchanging it for a more stable option. So, the governments add friction (limits, KYC equivalents or outright bans) and offer exchanges with less friction at a much lower rate. Check Argentina -- their "blue rate", used by hotels and other cash-based businesses on site, is often twice as favorable as the official rate that you get with plastic.
- dkjaudyeqooe 4y ago
  That's what they're called, but typically they're the only real and free market and thus have real prices. If a black market exists, that means the "official" markets are corrupt.
- waterside81 4y ago
  Argentina is littered with them. Walk down Florida Street (ironically named) in Buenos Aires and hear "cambio, cambio, cambio" being yelled out constantly.
- NikolaNovak 4y ago
  Fascinating,but understandable - I was born in ex-Yugoslavia and went through the civil war there so there are many things I take for fully granted that my (Canadian born) wife cannot imagine, from try hyperinflation to various black markets, bribery and corruption :)

churchill 4y ago

Oh, in case you're wondering - all the channels to arbitrage between both rates & become a billionaire overnight are effectively closed.

tw98521358 4y ago
For most people.

akomtu 4y ago

Black market rate means that you go to a subway station, locate a sketchy "banker" and exchange some currency. Rules and regulation apply only above the ground level. The alternative is going to the bank, waiting 2 hours in a line, and getting half of what that dude would've offered you, because the central bank decided that its currency is strong and should be valued that much.