In a square near the center of Algiers, traders move through the crowd with wads of euros, pounds, and dollars folded into their palms, calling out rates to anyone who looks worried about what their dinars are actually worth. It’s a scene that has played out on that same corner for years, largely undisturbed by whatever the government does with its official exchange rate. Algeria just gave its citizens seven and a half times more legal access to foreign currency than they had a year earlier, on the assumption that a bigger allowance would pull some of that demand back into the banking system. The black market didn’t shrink. It widened.
Raising the Allowance to €750 Barely Moved the Street Price
Until mid-2025, Algerians could legally exchange only around €100 worth of dinars a year for foreign travel, an amount that barely covered a single hotel night in Europe. That changed with Bank of Algeria Instruction No. 05-2025, which took effect on July 20, 2025, raising the annual allowance to €750 for adults and €300 for minors, alongside a separate $1,000 allowance introduced for pilgrims traveling to Mecca. On paper, it was one of the more generous currency reforms Algeria has made in decades. On the street, the effect was barely visible.
Square Port-Said Prices the Currency the Bank Won’t
That corner of Algiers has a name: Square Port-Saïd. It functions as Algeria’s de facto currency exchange, pricing euros and dollars against a rate the Bank of Algeria doesn’t officially recognize. In February 2024, the official rate for one euro sat near 145 dinars while the black market charged close to 241, a premium of roughly 66%, according to Associated Press reporting. More than two years and one major allowance increase later, the gap hasn’t closed. As of mid-July 2026, live tracking of the same informal market puts the euro at roughly 276 dinars against an official rate near 152, a spread of about 82%, with the dollar showing a comparable gap between an official rate near 133 and an informal rate around 238.
Seven Billion Dollars Moves Outside the Official System
The scale of that informal market is not a rounding error. Algerian authorities have estimated that roughly $7 billion in foreign currency changes hands on the black market annually. Much of that demand is mundane rather than speculative: households buying euros to pay for medicine, vehicle parts, or imported goods that are difficult to source through official channels, and business owners converting dinar holdings into euros to avoid being caught holding a currency they don’t trust to hold its value. Algerian law treats large-scale currency smuggling as a serious economic offense, carrying penalties as severe as two decades in prison, yet the volume moving through informal channels has kept growing rather than shrinking.
Restricting Access Doesn’t Remove the Demand Behind It
What Algeria’s experience shows is a version of a mechanism that shows up wherever a government tries to manage currency access rather than currency supply. A restriction on how much foreign currency people can legally obtain doesn’t eliminate the underlying want for it. It just relocates that want into whatever channel remains open. Nigeria’s experience with the naira offers a parallel case from a different angle: rather than a fixed allowance, Nigeria’s central bank tried repeated devaluations of its official rate, and each one left a gap between the official price and the market price that the next reset failed to close, because the reset addressed the price rather than the shortage driving demand into an informal channel in the first place. Algeria’s allowance increase followed a similar logic from the supply side: more legal currency became available, but the amount still falls well short of what a household needing dollars for medicine or a business needing euros for imports actually requires, so the parallel market continues pricing the difference.
The tourist allowance reform was a genuine loosening of policy, multiplying the legal ceiling by seven and a half times in a single stroke. But the black market’s response, holding steady and by some measures widening since the reform took effect, is a reminder that an allowance calibrated to the wrong number still leaves a shortage large enough for an informal price to form around it. The gap between the two prices, not the size of any single policy change, is the number worth watching next.
