Naira unification may lead to losses for black market speculators

June 29, 2020

Nigeria’s currency black market operators seem to be running out of time following the latest confirmation by the CBN Governor, Godwin Emefiele that plans to unify the Naira around the NAFEX rate was underway. The Governor said this at an Investors Conference organized by CitiBank.  Nairametrics reported on Tuesday that the CBN Governor confirmed the unification plans stating that if it is to be done, it will be around the NAFEX rate and not the black-market rate. The Governor also used the opportunity to take a swipe at black market speculators, describing those who purchase forex in that market as dealing in illegal activities. According to him, the rates they are buying the dollar from the black market are unrealistic. He said: “The CBN has always maintained that the black market is not a good determinant of the value of the naira.  “You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets.

“But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.” Foreign Exchange dealer at Nigeria’s biggest bank by assets told Nairametrics exclusively that the unification of the Naira’s exchange rates has already begun. He said; “The unification has already commenced with the rate at which CBN sells funds for SME and payment for School fees, travelling allowance and medical payment is within the IEFX levels. “As stated by the CBN Governor, the speculators in the Black market will lose money as soon as CBN begins selling to the BDCs and international flights starts. There’s also a need for the CBN to clamp down on speculators and round trippers in the market to stabilize rate which should not be more than c.$/N400” 

Emefiele, strengthened his cause of eradicating other currency exchange systems, while speaking at the conference, saying that the various exchange rates will be unified around the I&E window (NAFEX) exchange rate.“We will continue to pursue unification around the NAFEX Market”, Emefiele said, noting that as at the end of 2019, Nigeria experienced a “relatively stable market because the NAFEX rate and rate that the Central Bank does transaction outside the NAFEX was close to themselves. At some point, the NAFEX rate may be below the Central Bank rate” Victor Silas an Investment Analyst at a leading Nigerian financial institution explained to Nairametrics recently via phone chat that the recent drawdowns, being experienced at the black market will soon be a thing of the past. He said; “With the drawdown in the FX reserves, the odds are against the naira. As the economy reopens and the resumption of dollars sells to BDCs and attempts to meet piling FX demands, we might start to see pressures on the currency.” 

This move in unifying the exchange rate system is also expected that the present converging the rates estimated at N387 to $1 (I &E Window) will boost revenues for the Federal government which could see a gain of N20 on every US dollar earning in oil. Whilst the debate rages on about what the true value of the naira is, several factors are at play. The CBN Governor had alluded to the fact that the lull in business activities suggest forex demand should be low thus calling into question the pent-up demand being highlighted by several market analysts. According to him this suggests the black-market rate being reported are likely no representative of what the real demand is but rather driven by speculative forces. 

Conversely, market analysts believe the reluctance of the CBN to fund liquidity shortages at the I&E window is the reason why the black market has depreciated to about N460/$1. They claim legitimate transactions have already taken place in the parallel market especially for businesses who have obligations to meet but cannot access forex from official windows.CBN Governor, in his statement on Tuesday promised foreign investors and businesses with legitimate need to repatriate forex to “be patient” just like they were in 2016 and that the CBN will need all their legitimate demands.


Despite all the back and forth, it is likely that there might be some people who will suffer from any official moves by the CBN. Unification around the NAFEX rate of about N388 is effectively a devaluation from N360/$1. However, if the CBN supports this move with liquidity that matches demand from a reviving economy, then surely the days of the black market may just be numbered.