Our Experience Buying Forex At N360/$1

Nairametrics| The Central Bank of Nigeria (CBN) has instructed that commercial banks sell the dollar to customers at no more than N360. They have also instructed the BDC’s to sell FX at a price of N362/$1 to their retail customers. This of course is on the premise that the banks and BDC’s do not have any other source of supply, except the CBN.

Despite these efforts, the black market closed on Friday at N400/$1 and sold a little higher over the weekend. Our records suggest, the exchange rate is N405 early Monday, 10th of April 2017. If the CBN has instructed banks and BDC’s to sell at between N360-N362 why then is the parallel market selling higher? Could it be that the exchange rate is higher than suggested by the CBN? To determine what is exactly going on, we sent out a mystery shopper to the Muritala International Airport in Lagos and this is what we observed.

Deposit Money Bank

  • We went to a local commercial bank to ask if they had PTA to sell
  • They confirmed that there was PTA available and at a selling price of N360/$1
  • There was no display board as required by the CBN
  • We asked to buy $2k which would cost us about N720,000
  • They asked that we provide our passport, visa page and ticket.
  • Unfortunately, we did not have one of the documentation required and could therefore not purchase forex.
  • We decided to try the airport on the actual day of travel

Experience with Travelex

  • We went to Travelex and inquired if they had forex to sell and at what price
  • Travelex said they had forex and that they sold at N360/$1
  • Unlike a few months ago, where you had a large crowd in the Travelex booth, it was basically empty.
  • The asked that we make a photocopy of our ticket, passport data page and visa page
  • They asked how much we wanted to buy to which we responded $2,000
  • They asked for our ATM card and swiped accordingly.
  • Once the transaction went through, we were given a form to fill.
  • In the form, you had to fill in your details such as your name, passport number, BVN etc.
  • Once this was done they handed over the FX cash at an exchange rate of N360 and that was it. No charges.

BDC just a cubicle away

  • We decided to go to the Cubicle just beside Travelex. It’s run by a BDC called Ibro
  • We asked how much they were selling their FX to which they responded N400/$1
  • Being a BDC, we had expected that the rate will be at least N362 as instructed by the CBN
  • The lady in the counter insisted that it was N400/$1
  • We thought to ask how much they will buy from us but decided against it
  • We guessed it would have to be higher than N360 anyway

This experience buttress the fragmentation that currently exist in the FX market. Whilst ordinary Nigerians can buy forex easily for PTA, the parallel market remains an option for those who do not meet CBN’s regulatory qualification as legitimate demand. These include importers of items on the 41-banned list, forex speculators, small businesses not in the mood to meet CBN’s regulatory documentation, legitimate importers who require more than what is currently being allocated by the CBN etc. It appears the CBN’s mission to close the disparity between the parallel and official market is a mission impossible. Provided the CBN continues to meet the demands of large corporates and the retail end of the market it must learn to ignore what transpires at the parallel end of the market.

While, the parallel market remains a proxy for determining the true value of the naira, the value of the naira in the parallel market is not representative of the value of the naira. The official CBN rate of N360-362 is not either. The CBN must reintroduce a managed float system where rates can trade within a band just as we had before the capital controls were introduced. A gradual easing of the ban on 41 items can then be on the table once a semblance of price stability is established. It is also about time the government clamps down on illegal sale of forex in the streets of Lagos. While eliminating black market for any product that is tightly regulated is nearly impossible, the CBN can introduce a disincentive that can at least limit the reliability of this market.




Chacha Wabara

Chacha Wabara is a legal practitioner, blogger and fitness coach. She has over 5 years experience in blogging and freelance writing. She has written several articles and research work over the years as a freelance contributor. She joins Nairametrics as Our News and Analysis Lead.

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