Black Market Currency Dealers Go Undergound

On the teeming streets of Lagos, the Nigerian mega-city of 15 million people, the once omnipresent money-changers are going underground. They’ve become the latest target of authorities desperate to bolster the naira and crush a black market for foreign currency that’s boomed since the crash in oil prices strangled the inflow of dollars and battered the economy. This month, the Central Bank of Nigeria capped prices that Bureau De Change (BDC) can charge their customers for foreign exchange, effectively pegging the black-market rate, with intelligence agents threatening to jail anyone who doesn’t comply. The activities of the security agents is creating a parallel market within the black market, according to analysts at Lagos-based Afrinvest West Africa Limited stated. One trader in the Lagos suburb of Surulere, who asked not to be identified as he feared arrest, told Bloomberg that he would continue using the old rate with trusted customers and refuse to sell dollars to others. Anyone he doesn’t know may be a government spy, he said. “The black market will go further underground,” an analyst at Afrinvest, OmotolaAbimbolasaid. “The fact they went as low as getting security forces on the streets shows a new level of desperation.”Nigeria’s interbank market sets the naira’s official value and is meant to serve businesses. But the scarcity of foreign-currency has forced many to go to licensed bureaux de change and the unofficial, or black, market of informal street traders, both of which sell dollars at a higher rate. The central bank has made several attempts to defend the naira after it plunged in late 2014along with crude prices.Stock and bond investors are staying away from Nigeria, pointing to the wide gap between the official exchange rate and the black-market one of about N470 to a dollar. Forward prices suggest the naira will depreciate further on the official market, with 12-month contracts trading at 441 against the greenback. Source: Thisday