Effect of Foreign Exchange Arbitrage by Black Market on Nigeria Economy
The Nigerian economy may be severely impacted by illegal foreign exchange arbitrage. If you want to buy or sell foreign currency in Nigeria outside of the official market and without paying the high exchange rates set by the government, you’ll need to travel to the black market. Foreign exchange arbitrage has the potential to have a number of consequences for the Nigerian economy.
To begin, there may be a sizable difference between the official exchange rate and the black market rate due to the existence of the foreign exchange black market. The Naira, Nigeria’s national currency, might suffer if people stopped trusting it because of the gap. The Naira’s value may drop if trust in the currency weakens, which would raise the cost of imports and contribute to price increases.
Second, a drop in FDI in Nigeria may result from foreign exchange arbitrage on the illegal market. Potential foreign investors may be put off by the black market’s fluctuating currency rates and the resulting uncertainty. A drop in foreign direct investment (FDI) might stunt Nigeria’s economic growth and development.
It’s also possible for government revenues to drop due to the existence of an illicit market for foreign exchange. Since most illegal trade occurs outside of the banking system, the government risks receiving less money in taxes as a result. This reduction in funds might make it harder for the government to fund vital programs and improve infrastructure.
Another factor that may contribute to economic disparity in Nigeria is the existence of an illicit market for foreign currency. While those with access to foreign currency and the know-how to take advantage of arbitrage possibilities on the black market stand to gain significantly, the general populace stands to lose as a result of the Naira’s depreciation and the consequent inflation.
Lastly, the success of Nigeria’s monetary policy might be hampered by the country’s active illegal market for foreign exchange. With such a wide gap between the official and black market currency rates, the Central Bank of Nigeria may struggle to rein in inflation and steady the economy.
Overall, the impact of illegal currency exchange on Nigeria’s economy is complex. Instability in the currency market can discourage foreign investment, cut into tax revenue, exacerbate economic disparities, and make it difficult to conduct sound monetary policy. Foreign currency market openness and stability must be prioritized by the Nigerian government as it works to resolve the problems associated with the black market.
You can also check other Research here:
- Accounting Research Project
- Adult Education
- Agricultural Science
- Banking & Finance
- Biblical Theology & CRS
- Biblical Theology and CRS
- Biology Education
- Business Administration
- Computer Engineering Project
- Computer Science 2
- Criminology Research Project
- Early Childhood Education
- Economic Education
- Education Research Project
- Educational Administration and Planning Research Project
- English
- English Education
- Entrepreneurship
- Environmental Sciences Research Project
- Guidance and Counselling Research Project
- History Education
- Human Kinetics and Health Education
- Management
- Maritime and Transportation
- Marketing
- Marketing Research Project 2
- Mass Communication
- Mathematics Education
- Medical Biochemistry Project
- Organizational Behaviour
- Political Science
- Psychology
- Public Administration
- Public Health Research Project
- More Research Project
- Transportation Management
- Nursing
Effect of Foreign Exchange Arbitrage by Black Market on Nigeria Economy