Pursuant to its powers under the FEA, The Central Bank of Nigeria had at different times issued several circulars, regulations and guidelines to regulate the activities of the operators and vendors at the Parallel Market. These regulations and guidelines are necessitated due to the fact that the Central Bank of Nigeria has not in most times had the entire capacity to cater for the level of demand of the foreign exchange, hence, the parallel market has always flourished.

The regulations and guidelines recognize the Parallel Market and also introduced several measures at different times to standardize trade and foreign exchange at the Parallel Market. It is therefore safe to assert that it is legal and permissible to transact and source for foreign exchange at the Parallel market.

The Central Bank of Nigeria from time to time also places restrictions on Forex for importation of certain classes of goods; these include agricultural produce, furniture and other consumables. It is because of these restrictions that most if not all of the businesses in the agricultural, furniture and other similar excluded sectors cannot access or source for Forex from the Central Bank of Nigeria or the deposit money banks, consequently, the companies/entities in such sectors have to resort to sourcing Forex from third Parties through the Parallel Market.

Sources of Foreign Exchange in Nigeria 
Nigeria’s foreign exchange market is made up of three major sources or segments, the Central Bank of Nigeria, the autonomous market (made up of inter-bank and diaspora remittances) and the parallel market. These various segments of the market evolved over time owing to developments in the economy. For the purpose of this opinion, the three segments or sources are highlighted below;

The Central Bank of Nigeria (CBN) Regulated Market: The CBN has been immensely influential to the foreign exchange market through its authority over money supply and periodic price and non-price regulations. As a source of foreign exchange, the CBN finances three major areas; (i) Settlement of matured letters of Credit that have been opened for importation; (ii) Importation of Petroleum Products; and (iii) Import of raw materials. The exchange rate or price is usually determined by the CBN and not market forces. Despite its involvement in the Forex Market, the
CBN still approves Foreign Exchange on some other licensed platforms, as a way of achieving ease in doing business in Nigeria.

Diaspora Remittances/Export Proceeds: Diaspora Remittances has been revered to be the second major source of foreign exchange in Nigeria. The crude oil was like the cornerstone of the Nigerian Foreign Exchange. However, this market was meant to promote non-oil exports, four major options accrue to businesses, individuals, and exporters intending to transact in this market, thus; they can sell the proceeds to the CBN, they can utilize the proceeds to open letters of credit (LCs) with their bankers to secure future business transactions, they can sell the proceeds to importers and the last is to sell to banks, who in turn could sell to importers and other individuals.

The rates in this market are subject to agreement of the parties. Also, the CBN, being the apex bank, had, at some point, issued policies on this source, geared towards increasing the inflow of foreign currency into Nigeria, this source is propelled by businesses or individuals from the diaspora. 

The Parallel Market: It is worthwhile to register the fact that the Parallel market of the Nigerian foreign exchange does not exist without being controlled or governed by the CBN. The Regulations, policies and guidelines for the establishment of the Parallel market by the government through the CBN came in to force in 1995, and this makes it necessary for the Bureau De Change operators to be licensed by the CBN before they can operate in the market. At the peak of Foreign Exchange activities in Nigeria, the demand for Foreign Exchange rose to a point that it was so evident that the other sources highlighted above are incapable of meeting the ever rising demand. In fact, many individuals and small-scale businesses could not fulfil their foreign exchange needs.

This paucity of capacity of the CBN to cater for the rising demand of Foreign Exchange gave birth to the parallel market. The Bureau De Change is licensed by the CBN to trade Foreign Exchange in the parallel market. It can be resolved that the presence of the Parallel market is a response to the government and CBN’s interventions and persistent demand for Foreign Exchange in Nigeria. The rate at the parallel market has also always been determined by market forces. Businesses that do not qualify as a priority for the CBN forex are expected to resort to the
Parallel market as a source of forex to finance their business.

Licensing of the Operators in the Parallel Market by the Central Bank of Nigeria
The Central Bank of Nigeria is the sole authority responsible for licensing operators in the Parallel Market it finds worthy, the bank has from time to time licensed qualified dealers/operators in the market and published the list of qualified dealers.

The only due diligence obligation on person transacting with the operators is to ensure that a particular operator or dealer in the market is duly licensed by the Central Bank of Nigeria. Although in July 2021, the CBN stopped further licensing of Bureau De Change operators in the Parallel market, the CBN also stopped allocating forex to BDCs but the dealers already licensed by the CBN before July, 2021 continued to operate by sourcing forex through other private sources. This is perfectly legal, provided the parties comply with the requirement of Section 1 of the Foreign Exchange Act by conducting the transaction in accordance with the requirements of the laws and the regulations. 

Conclusion 
In conclusion, it is perfectly legal to purchase Foreign Exchange from the licensed Bureau De Change and the other sources permitted by law. For an act to be unlawful or illegal, it must be clearly declared so by a statute or law, and the punishment for same must be prescribed by a law.

Considering the above evaluation of the working of the Nigerian parallel market of the Foreign Exchange, it can be concluded that trading and transacting in the parallel market is not illegal or unlawful. As a matter of law and of fact, several laws and regulations by the CBN recognized the existence of the Parallel market and also permitted transactions by the operators and dealers in the market.
Concluded
Braimah, a lawyer and consumer rights advocate, writes from Lagos.