Why does Nigeria have a parallel exchange rate market for the naira?

It exists because of several factors. First of all, Nigeria has capital outflow restrictions. That by itself creates pressure on the foreign-exchange. As Nigeria is an oil-dependent economy, the foreign exchange is in short supply. So whenever, anything is in short supply, a premium on that item starts appearing. People will pay a higher price to have access to it. In this case, the US Dollar. The general public and businesses will pay a premium to have access to the foreign exchange and the US Dollar is the top currency of choice.

This is called the curb rate or street rate. In many places, such a rate is called the parallel market rate, as in referring to the parallel market that co-exists along with the official market rate.

I did a short video on this subject not too long ago, which explains the concept.

https://www.youtube.com/watch?v=...