In Nigeria, foreign exchange is regulated by the Central Bank of Nigeria (CBN), which controls the official exchange rate for the Nigerian Naira. However, due to a shortage of foreign currency, a parallel market has emerged, commonly referred to as the black market.
The black market exchange rate is typically higher than the official exchange rate and is often used by individuals and businesses to access foreign currency. Forex brokers operating in Nigeria are required to adhere to the regulations set by the CBN and use the official exchange rate for their transactions.
It is illegal for them to use the black market exchange rate. Brokers must obtain the necessary licenses and approvals from the CBN and other regulatory bodies before they can operate in the country.
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That being said, there have been instances of unscrupulous brokers engaging in fraudulent activities, such as using the black market exchange rate to deceive their clients.
It is important for traders to conduct thorough research before choosing a broker and to ensure that the broker is registered and licensed by the appropriate regulatory authorities in Nigeria. In addition, the situation with the black market exchange rate can have an impact on the overall forex trading environment in Nigeria.
If the black market exchange rate becomes too high or volatile, it can create challenges for traders and businesses trying to access foreign currency for their transactions. This can lead to decreased trading volumes and reduced market liquidity.
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The government and regulatory bodies in Nigeria have been taking steps to address the issues with the parallel market, such as increasing the supply of foreign currency and strengthening the regulation of forex trading activities. These efforts can help create a more stable and conducive environment for forex trading in Nigeria.
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