Black Market, Official Dollar Rate Gaps – LCCI Explains Why

The Central Bank of Nigeria (CBN) has been advised to discontinue the foreign exchange (forex) restriction placed on 43 items in the official market.

According to the Lagos Chamber of Commerce and Industry (LCCI), the 43 items banned from accessing foreign exchange in the Investors’ and Exporters’ window are part of the factors contributing to the widening gap between the official and black market rates.

Note that on Wednesday, the dollar was offered at a rate of N793.70/$1 in the Investors’ and Exporters’ window, but the USD was sold at N816.6/$1 in the black market, indicating N22.9 kobo gap in both prices.

Recall that in June 2015, the CBN announced that importers of rice, cement, fertilizers, poultry chickens and turkeys, and palm oil, amongst others, will no longer get forex in the official market. 

CBN said the decision was made in order to support local producers of the products and ensure the efficient utilisation of the foreign exchange. 

Following recent reforms of the CBN’s foreign exchange policies, the financial regulator said the 43 items restricted from accessing forex in the Investors’ and Exporters’ window remain banned in the official market. 

LCCI President, Michael Olawale-Cole, said the naira’s struggle against the dollar was also caused by the restriction of the items, as it pushes people to approach the black market for forex. 

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He also stated that the forex liquidity issues in the official market are driving demands to the black market as well, “The emerging gap between the official rate and the BDC rate may be attributed to several factors, including fx liquidity issues at the NAFEX window, pushing economic agents into the parallel market, and the continued FX restriction for the 43 items in the CBN list of FX restrictions.” 

Olawale-Cole suggested that the CBN should lift the suspension on the 43 items and ensure price stability through monetary policy consistency. 

The LCCI president also urged the CBN to improve its communication on the framework of foreign exchange rate management. 

Meanwhile, Olawale-Cole advised the Federal Government to sell its stake in real estate holdings to create another source of revenue to manage its debt profile. 

“The government should explore other avenues to manage debt, including opening equity opportunities and offloading/selling off some of its real estate holdings,” he said.