Nairametrics| About two and a half years ago when the CBN decided to devalue the Naira to about N162.5/$1, no one in their wildest dreams ever thought that we will someday be at a place where the dollar will be trading above N500/$1 at the black market. To some of us at Nairametrics, who are savvy with the effects of policy making in the country, we also could never had predicted this. It has happened already and all we can do now is look at the brighter side.
A number of our readers have called to ask me what they should do about the continued depreciation of the naira at the black market. I’ve often told them the same thing I’ve been saying since this dramatic crash of the naira begun. I’ll once again repeat some of what I had said and also add a few more suggestions.
What do we do now?
Keep buying dollars – If you had taken some of our advice and kept on acquiring dollars as an asset class in your portfolio then just keep doing so. We do not see an immediate end in sight, at least not now. Even if you bought dollars at N190 and think buying now at above N500 will dilute your average, never mind, just keep buying. It will even out at the end of the day. That at least is the only way you can be ahead of the curve. Surely, there is some hope that the latest Eurobond offer could help strengthen the naira but that depends on the whims and caprices of one man…Mr Emefiele. You don’t want to hedge your future on government officials. And even if the naira strengthen’s keep buying till Nigeria turns less of an import dependent economy. You and I know that is not happening anytime soon.
Start buying dollars – If you were one of those who believed in the naira or will not buy dollars because you are waiting for it to come down, then I suggest you change your mind. What goes up in Nigeria hardly comes down. And even if it does, it goes right back up because somehow we seem to have this invincible springboard that propels things back up. So you still do not lose so far you still keep buying. This country rewards people who align with foreign currencies not those who do not. Whenever your patriotic strait shows up just sell some dollars and in a flash you are back to Naira. At least, it is more likely that you will have more naira than less.
Consider Bitcoins – This is still seen as an esoteric business in Nigeria but maybe it’s time you consider reading about bitcoins. We have some articles about bitcoins on Nairametrics that can get you started already. You see, bitcoins is actually a risky venture because the price typically swings like a yo-yo. It can be $1,200 to a bitcoin today and then tomorrow you hear it’s $800. But somehow it still manages to rise again to $1,200. If you are not the type that likes to trade short-term then never mind the swings. It often pays those who hold long term. The only thing I can say is that try to follow the news about bitcoin and never just buy and think it’ a TV that you see everyday in your living room that hardly changes in value. This is no more a world where you buy an investment and just keep it aside like that your house in the village that you visit once in a year.
Start Earning FX – If you haven’t started doing this already then maybe you have yourself to blame. There are various ways you can do this and it doesn’t have to be through buying and selling. Earning FX means charging in dollars which also means serving clients who live abroad. It could even be Family members who need you to do one or two things for them in Nigeria. Better tell them you have changed currency and now charge in FX. Open a domiciliary account and charge them in dollars. And if you have a skill then please sign up to some of these sites that offer freelance jobs for people with skills. See what you can do for them to earn dollars. If you are the industrious type them think of an export business. I understand there are a lot of challenges with export as you can often need to deal with multiple agencies just to export an item. But it’s worth the stress, so don’t give up.
Cut down on FX related cost – This one may enter your right ear and fly out of your left ear but half a word is enough for the wise. If you are in a business that requires significant FX input for a product that you sell and earn in naira then you are only racing against time. Better re-calibrate and switch the model. It should be, sell in FX and import in FX or sell in FX and input in Naira. This economy shows no mercy to people who can’t hedge their FX cost or match their input cost to the same currency with their output selling price. Even large Nigerian corporates like Dangote Cement and Guinness recognize this fact and have started adjusting their business model, let alone you. Do you have kids abroad? Well, may be you should think hard about that too. It’s not going to get easier. May be you will probably consider making more sacrifices here just to adjust or look for a job or expatriate job that pays in dollars. Don’t fool yourself by thinking your naira earnings have enough buffer.
This is my candid opinion about the current state of things in Nigeria. Again, you are not compelled to take any of these suggestions. In fact, there is another option. Just sit down and do nothing except pray for Nigeria.