Why Dollar Scarcity Persists in Nigeria
The black market dollar to naira exchange rate is approaching almost #620/1$ today. This is coming on the hills of the persistent dollar scarcity that has been plaguing Nigeria in recent times.
To understand why dollar scarcity persists in Nigeria, it is important to understand the context, the forces of demand and supply, and why the naira is always depreciating and not appreciating in value. This Q&A blogpost will answer some of the questions around foreign exchange in Nigeria.
Why is the naira losing value against the dollar?
Economics 101 – the principle of demand and supply states that; when there is excess demand and not enough supply, the price goes up. Nigeria is a poor third-world economy that barely exports anything and imports almost everything. We import food, fuel, medicine and even spend dollars on other less essential things like paying between 50-100 million dollars just to watch European soccer leagues. The country is spending too much dollar on importation and not earning enough from exports is the main reason why the naira is always loosing value against the dollar.
Between April and June 2022, the naira has jumped from #570/1$ to almost #620/1$ on the black market. This short-term sharp rise was largely caused by the campaign activities of politicians. Nigeria’s politics is heavily marred with bribery and corruption. Politicians will often bribe party delegates at the primaries and attempt to buy voters at the general elections. So, this sharp depreciation of the naira against the dollar is likely to continue until after the general elections next year as politicians will keep trying to influence the election with money.
The only way to improve the value of the naira against the dollar is for Nigerians to start producing most of the items they consume and for the country to start exporting valuable goods. This means the government needs to find a way to improve the quality of education in the country and improve infrastructure – electricity that will spur production. Security needs to be improved as well as rule of law. Anything less than these will only mitigate the problem in the short term.
Dollar to Naira Exchange rate FAQ
How can I buy CBN dollars?
The Central Bank of Nigeria CBN has a scheme to sell dollars directly to Nigerians at its official rate of about #420/1$ compared to the #620/1$ they would get on the black market. Each Nigerian is entitled to $5,000 as personal travel allowance PTA or $10,000 as business travel allowance BTA once every three months.
To buy the CBN dollars, you have to apply for either PTA or BTA via your commercial bank if you meet the requirements.
How do I buy and sell dollars in Nigeria?
You can buy and sell dollars in Nigeria on the black-market popularly known as Aboki. The black market rate is much higher compared to the government regulated official market. And you can also buy dollar from any commercial bank as PTA or BTA if you are qualified.
Do Nigerian banks sell dollars?
Yes, they do. Nigerian banks sell up to a maximum of $5,000 as PTA and $10,000 as BTA to qualified and confirmed travelers. If you need dollars to pay your school fees abroad, pay medical fees or simply travel for tourism, Nigerian banks will sell you dollars but with condition.
How do I fund my dollar account in Nigeria?
If you have a domiciliary account in a Nigerian bank, the easiest way to fund it is to buy some dollars from the black market and deposit it. You can also receive cash transfers either local or from abroad into it for goods or services you might have rendered.
Does CBN sell dollars to individuals?
Yes, the CBN sells dollars to individuals who need it to import items or to travel abroad. Individuals can apply for either PTA or BTA via their commercial banks.
Can I receive dollars in my Naira account?
Yes, you can. International dollar transfer can be sent directly into your naira account but it will first be converted into its naira equivalent, with the naira equivalent deposited into your account at the official CBN rate. Receiving dollars into a naira account might be convenient, but bloggers and other freelancers who earn in dollars are advised to open a domiciliary account so they can get a better deal.
Which bank has the best dollar rate in Nigeria?
The exchange rate is uniform in all Nigerian banks if you are receiving dollars into a naira account. The dollar will be converted at the prevailing CBN rate. However, if you are spending dollars with your Naira debit card, First Bank and GTBank offer cheaper dollars at about #480/1$ compared to Fidelity Bank that charges up to #500/1$.
How much does it cost to open a dollar account in Nigeria?
Opening a domiciliary account is free in all Nigerian banks. However, you will be required to leave a minimum of $100 operating balance in the account. Wema Alat domiciliary account and UBA Freedom account do not require the $100 operating balance but have other requirements attached.
Can I change dollars at the bank in Nigeria?
Yes, you can. All Nigerian commercial banks offer bureau de change service, but we recommend you use Aboki black market service as you will get a much higher exchange rate there. The exchange rate at commercial banks might be as low as less than #200/1$ compared to what you will get at the Aboki black market.
One Comment