"Opinion"

The recent move by the CBN to restrict the activity of one of the largest rate platforms has been met with mixed reactions. It has stoked a lot of anxiety, anger and misconceptions. And to this end, I hope my explanation sheds light on why their action was pertinent at a time like this.

I'll try to explain this as simply as I can.

Let’s use the petroleum black market as an analogy.

For the purpose of this example, we have 4 types of black-market petrol sellers, A, B, C, D.
Seller A- got petrol from a burst pipeline, siphoned as much as he could and went to hoard for a scarce period.

Seller B - Stole petrol from a tanker/depot/office and goes to hoard for a scarce period.

Seller C - Gets petrol from his office as part of his entitlement. He has excess and decides to sell.

Seller D - Buys from the fuelling station at regular price, hoards it for a scarce period.

Scarce period...

They all agree (not on a central platform) to sell 4 litres for N1,500, they've all been waiting for a time like this. Initially business is good, and sales are rampant. As the period extends people adjust their spending to petrol usage... Of the four BM petrol sellers, Seller A says to himself, it cost me nada to get this so, I can’t take it back home and wait till another period to sell, I’ll sell at 1000, seller B stole his and goes the way of A, seller C was given him and joins, seller D is reluctant and struggles to reduce his price because he's considering the cost price. If the period extends or there's a feasible end in sight sellers A, B, C will hurriedly sell off their product and count only profits...

How can this be likened to the dollar black market?

Let’s consider the players in this space.

Seller A - Internet fraudsters
Seller B - drug dealer/international prostitutes, human traffickers etc
Seller C - politicians, musicians, holiday travellers
Seller D - forex traders, foreign investors, employees

Following the logic above only seller D trades the dollar and has something to lose if he sells or earns below cost price.

For seller A, whatever the exchange rate is is fine, he just wants to rent a house, buy a car, pop another bottle, he'll steal some more USD tomorrow.

Seller B has gotten their value in foreign currency, so the exchange rate is a plus, no loss here.

Seller C, no loss here either, higher exchange rates favour them.

Why this illustration, the issue of demand and supply determining the exchange rate isn't entirely true, most of it is artificial. By decentralizing the parallel market rate, people would sell with their needs in view and not profitability. There would be competition and ultimately a decline in the rate. People would revert to using google to check the exchange rate for currency pairs they wish to buy and sell slightly higher on the black market. This is what’s attainable in other countries that have black markets operating, legally or not. There is enough dollar on the black market in Nigeria to meet our local needs... some other sources I didn’t mention; oil bunkering, illegal mining and others.

In summary, Emefiele is on the right path, we should proffer ideas that would help instead of those that will deter him. This is the only country we've got; the politicians have messed it up and let’s help him fix what can be fixed. Get the email address of the CBN and send them your ideas. Or do it via social media.

God bless Nigeria.

Is that why Wema bank sold dollar for 595

polimaf:
Is that why Wema bank sold dollar for 595

If any bank sells USD to you at that bizarre amount you quoted, please post the proof here so we can see it, investigate and call them out.
OP, you nailed it. May you continue to grow in wisdom. Mr Emefiele and his team are really dealing with them and expect them to fight back.

All the enemies of Nigeria will lose las las. They always lose. God bless Nigeria.

FreeStuffsNG:

If any bank sells USD to you at that bizarre amount you quoted, please post the proof here so we can see it, investigate and call them out.
OP, you nailed it. May you continue to grow in wisdom. Mr Emefiele and his team are really dealing with them and expect them to fight back.

All the enemies of Nigeria will lose las las. They always lose. God bless Nigeria.

check the image attached. Forgive my language in the reply , I was really angry at em

polimaf:
check the image attached. Forgive my language in the reply , I was really angry at em

I understand your displeasure sir.

Sincerely, if it is confirmed that the communication is actually from WEMA and not one corrupt official of WEMA, then you are absolutely right that they are trying to rip you off. It is good that you exposed them .
To get USD, forget these apps , go to your bank physically and request. There are conditions required and if you satisfy it, it will be released to you but if you don't use it, you will need to return it.

Wema actually needs to be sanctioned by CBN. Please send this as email to the customer complaint section of CBN and like I have once experienced, it will be treated.
Any bank selling USD to you at that bizarre amount needs to be sanctioned by CBN.

FreeStuffsNG:

I understand your displeasure sir.

Sincerely, if it is confirmed that the communication is actually from WEMA and not one corrupt official of WEMA, then you are absolutely right that they are trying to rip you off. It is good that you exposed them .
To get USD, forget these apps , go to your bank physically and request. There are conditions required and if you satisfy it, it will be released to you but if you don't use it, you will need to return it.

Wema actually needs to be sanctioned by CBN. Please send this as email to the customer complaint section of CBN and like I have once experienced, it will be treated.
Any bank selling USD to you at that bizarre amount needs to be sanctioned by CBN.

All right. I'll do that right away. Thanks

I really love this, it helps me see things from cbn perspectives, it is also very interesting to read.

But followong your fuel price example.

People will not consider the black market price of fuel at all, if they could walk into a fuel station and buy it.

Shouldn't the real issue, which is the heavy demand and inadequate supply of dollar, be tackled instead


Cbn has authorised commercial banks to supply to the public, but the banks are already putting customers on wait list. Customers automatically will go back to the same black market that have been cut short of their own supply.

This can only drive price higher

I don't know where to start your economics lesson.

You are absolutely correct. Been trying to explain this to some folks but no reasoning among them.
In the land of the blind the one eyed person is the king

We are very greedy in this part of the continent so In essence if there's no platform to satisfy our greedy exchange rate we will resort back to google rate as obtainable in other countries.

I still have some reservations of this CBN's move to be upto 50% effective knowing well the usual economics we learnt in school does not always apply in Nigeria.

Oyes, We see product price increasing while the quantity and to some extent quality reduces and the regulatory bodies says or do nothing about it.

polimaf:
check the image attached. Forgive my language in the reply , I was really angry at em

That's outrageous. Stanbic sold to me atN450 when I made an online payment on Saturday. UBA also charges outrageously as well. The CBN needs to beam it's searchlight on banks as well.

Jainine:
I really love this, it helps me see things from cbn perspectives, it is also very interesting to read.

But followong your fuel price example.

People will not consider the black market price of fuel at all, if they could walk into a fuel station and buy it.

Shouldn't the real issue, which is the heavy demand and inadequate supply of dollar, be tackled instead


Cbn has authorised commercial banks to supply to the public, but the banks are already putting customers on wait list. Customers automatically will go back to the same black market that have been cut short of their own supply.

This can only drive price higher

I agree there is still so much to be done in terms of accessibility to forex. Sidetrack… Personally we are wasting our scarce forex on importation of PMS… let oil giants like Chevron, Mobil, Total etc supply the country PMS, AGO, DPK, give them concessions instead of subsidies till we get our refineries working.

Still, I will hope that the CBN instructs banks to increase the limit on USD spending on master and Visa cards.

Lastly, there is no scarcity of forex in Nigeria per se… it’s just hoarded, some by those who misappropriate foreign loans, and thanks to panama paper they rarely trust foreign banks to safeguard their loot… the only reason why the average Nigerian can be an entrepreneur is also because of accessibility to forex directly or indirectly. Millions of USD has been found in safe houses, sewers etc. some private jet companies only accept this scarce USD, some hotels in Ikoyi only accept this scarce USD, some schools in Nigeria only accept this scarce USD. While economics textbook make provisions for moments like these to create wealth, we should try to offset the anomaly.

FreeStuffsNG:

If any bank sells USD to you at that bizarre amount you quoted, please post the proof here so we can see it, investigate and call them out.
OP, you nailed it. May you continue to grow in wisdom. Mr Emefiele and his team are really dealing with them and expect them to fight back.

All the enemies of Nigeria will lose las las. They always lose. God bless Nigeria.

Thank you… We need creative ideas now, not opportunistic ones. There’s a question I’ll pose to people who say, this situation favour’s them… Zimbabwean currency is weak, so why don’t people hurriedly go spend their profits there? If you know the answer to this you’ll see where Nigeria is headed.

It is when the likes of AbokiFX are silenced that scrupulous elements can easily fix prices. With AbokiFX, any low price seller will give those that are colluding to fix high rate a rethink.

Forex is beyond the CBN because it is an issue of demand and supply. If oil was selling for 120 USD per barrel and more dollar was available for importers, it would still been around N250-N350. Those at fault are those in charge of the various aspects of the economy. Cocoa alone if well processed into chocolate candies and the likes can meet all our forex need in Nigeria. I said it and can back that up. What we have are leaders playing politics by appointing an southern man somewhere they can always blame. If i was in Emefiele's shoe I probably come up with a scapegoat too. AbokiFX just happens to be the selected fall guy. Emefiele doesn't produce dollar or forex.
Even the hike in food prices is being blamed on Igbos in some quarters. They say it is the increase in spare parts that is causing transport cost to rise and therefore affecting food prices too. That's just plain AbokiFX politics of making Igbo's the fall guy. Nobody wants the remaining 250 ethnic group to reason their matter in times of aggression.

cybertron88:

That's outrageous. Stanbic sold to me atN450 when I made an online payment on Saturday. UBA also charges outrageously as well. The CBN needs to beam it's searchlight on banks as well.

Exactly, I've noticed Wema doing this before, but I ignored cos I didn't do that maths well