Analyzing the Growing Gap Between Official and Black Market Rates and the Impact on Investments

Feranmi Olaseinde

Hatched by Feranmi Olaseinde

Aug 29, 2023

4 min read


Analyzing the Growing Gap Between Official and Black Market Rates and the Impact on Investments


The divergence between official and black market rates has become a cause for concern among analysts. Recent market developments in Nigeria, specifically related to the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) and the Investors' and Exporters' (I&E) FX Window Spot Rates, have brought this issue to the forefront. Additionally, the investments made by Serena Williams and Andela investors have added a unique perspective to the discussion. This article aims to explore the implications of the growing gap between official and black market rates on investments and highlight the significance of Serena Williams' involvement in the Nigerian market.

Understanding the Shift in FX Rate Calculation:

Until now, the rates for NAFEX and I&E FX Window Spot Rates were determined based on indicative quotes provided by traders. However, a recent market notice issued by FMDQ Exchange has introduced a new approach. Going forward, these rates will be calculated using actual FX market transaction data, ensuring a more accurate representation of the market. This shift is an important step towards aligning the rates with the realities of the FX market, reducing the potential for manipulation and ensuring a fairer system.

The Growing Gap Between Official and Black Market Rates:

One of the major concerns surrounding the FX market in Nigeria is the widening gap between official and black market rates. This divergence creates uncertainty and hampers the overall economic stability of the country. While the official rates are determined based on regulated mechanisms, the black market rates are influenced by various factors, including supply and demand dynamics, speculative activities, and capital flight. The increasing gap between these rates raises questions about the effectiveness of the official exchange rate regime and its impact on investments.

Serena Williams' Investments in Nigeria:

Serena Williams, a renowned tennis player, has made significant investments in Nigeria through her venture capital firm, Serena Ventures. Her involvement in the Nigerian market demonstrates the potential she sees in the country and its entrepreneurial ecosystem. Serena Ventures established a $111 million venture fund in 2014, and last year, it injected $3.3 million into Stears Inc., a Nigerian data and insights firm. This investment showcases Serena Williams' confidence in the Nigerian market and its ability to foster innovative startups.

Impact on Investments:

The widening gap between official and black market rates has a direct impact on investments in Nigeria. Investors face challenges in accurately valuing their investments, as the official rates may not reflect the true market value. The uncertainty surrounding exchange rates can make it difficult for investors to determine the profitability and viability of their ventures. This situation can discourage potential investors, hampering economic growth and stifling innovation. Moreover, the black market rates may attract speculative activities, further distorting the market and creating additional risks for investors.

Actionable Advice for Investors:

  • 1. Conduct Thorough Due Diligence: As an investor, it is crucial to conduct thorough due diligence before making any investment decisions. This includes analyzing the prevailing exchange rate situation and its potential impact on the investment. Stay updated with the latest news and market developments to make informed choices.
  • 2. Diversify Investment Portfolios: Diversification is key to mitigating risks associated with exchange rate fluctuations. By diversifying their investment portfolios across different sectors and regions, investors can reduce their exposure to a single market and minimize the impact of any adverse exchange rate movements.
  • 3. Engage with Local Experts: To navigate the complexities of the Nigerian market, it is advisable to engage with local experts who possess in-depth knowledge of the regulatory environment, market dynamics, and exchange rate fluctuations. Establishing strong partnerships and networks can help investors make more informed decisions and adapt their strategies accordingly.


The widening gap between official and black market rates in Nigeria poses challenges for both the FX market and investments. The recent shift in calculating FX rates using actual market transaction data is a positive step towards a fairer system. However, further measures are required to bridge the gap and ensure a more stable and transparent exchange rate regime. By following the actionable advice mentioned above, investors can navigate the uncertainties associated with exchange rate fluctuations and make informed decisions to capitalize on the potential of the Nigerian market. Serena Williams' investments in Nigeria serve as a testament to the country's entrepreneurial potential, attracting attention from global investors and fostering a more inclusive and diverse business ecosystem.

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