IMPACT OF BLACK MARKET ON NIGERIA DOLLAR FOREIGN EXCHANGE
The black market has had a major effect on the foreign exchange market for Nigerian dollars. The government of Nigeria has tried many different methods to regulate the country’s currency exchange rate, but the underground market has persisted. The value of the Nigerian naira has declined because the black market exchange rate frequently exceeds the official exchange rate.
Among the many negative effects of the black market on the Nigerian dollar’s foreign exchange is a drop in tax collection. When comparing the official exchange rate with the black market exchange rate, the government loses a lot of money. The Nigerian economy suffers as a result of this income shortfall since less resources are available for investment in infrastructure and other forms of economic growth.
Inflation is another effect of the black market on the foreign exchange market for Nigerian dollars. Inflation rises as a result of a rise in the cost of goods and services brought about by the black market exchange rate. Increasing prices hurt the Nigerian economy because consumers can’t afford as much and firms have a harder time making a profit.
Foreign investment in Nigeria has dropped in part because of the illicit market. The black market exchange rate makes it difficult for foreign investors to determine the true worth of their interests in a nation with a variable exchange rate. Because of the decline in foreign investment, less resources are available for development projects in Nigeria.
Furthermore, corruption has grown in Nigeria as a direct result of the illicit market. Crimes including money laundering and smuggling have increased as a result of the illicit market’s high exchange rate. This rise in corruption hurts Nigeria’s economy because it discourages foreign investors and weakens the country’s legal system.
Finally, citizens in Nigeria are less likely to trust their government because of the underground market. Many Nigerians believe their government is corrupt or incompetent because of its failure to stabilize the currency’s value. This loss of faith hurts the Nigerian economy because fewer Nigerians are prepared to invest in their own country and because it weakens the authority of the government.
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