Nigeria’s naira recently hit a record low against the US dollar, but people around the country may be asking themselves whether this has much of an effect on their everyday lives. The truth is that a weak national currency affects more areas of our lives than might seem possible at first glance.
Why Is the Naira So Low?
The dollar has been overwhelming many other currencies in the last couple of months. Global scarcity of dollars has helped to drive up the price, with many people seeing the American currency as a safe haven in turbulent times. Additional factors in the dollar's strength include the good health of the US economy and the fact that the North American country has raised interest rates.
The naira has been falling against the dollar for over a year, despite the Nigerian government making efforts to support the national currency. In addition, the growing importance of cryptocurrencies and the fact that more money is flowing out of the country on imported goods are other reasons why the naira has lost over 70% of its value in less than a decade. The Bank of America recently suggested that the Nigerian currency will lose over 20% more of its value in 2023.
The Impact on Imports and Exports
Nigeria currently exports a huge amount of petroleum, gas, cocoa beans, and gold. The country imports electronic goods, cars, tires, and a vast range of foods. This activity led to a foreign trade deficit of N1.94 trillion in 2021, as the country imported far more than it exported, causing an imbalance that has made the naira weaker.
This means that imported goods are more expensive, while exports become cheaper for other countries to buy from Nigeria. Since many Nigerians send money overseas to pay for things like education and medical fees, a weak naira is going to affect them greatly, since every overseas remittance becomes more expensive.
Anyone who simply consumes imported goods at home could find that their shopping bills continue to rise, which is one reason why food inflation is now so high.
Online Spending Power Affected
The online shopping market is growing rapidly in Africa, but many people look to international sites to carry out their purchases. When the local currency is strong, this can be a way to find bargains, but as it drops, the price of buying abroad becomes more expensive.
With many sites selling products in US dollars, the current strength of this currency restricts what Nigerians can buy with their naira, meaning that buying locally is the best choice. However, there are some sectors in which dollars are the most commonly used currency for online payments. One example of getting around this is seen in the world of online gaming, where US dollars are among the most widely used currencies for international players, meaning that currency rates affect Nigerians.
While the naira is so low every tip for making the most of your funds is more important. This guide to roulette strategies reveals the house edge is lower in European roulette than in the American version. It also confirms that setting a playing budget limit and sticking to it is the safest way to avoid spending more than you have in mind. However, we can see that popular strategies like Martingale don’t guarantee success, so don't rely on them to stretch your nairas further.
We can also avoid the strong dollar by using sites that accept cryptocurrencies, which are extremely popular in Nigeria. While people use the likes of Bitcoin for sending or receiving money, it can also be used on some shopping sites as a payment method. This list of stores in Nigeria that accept BTC includes Regal Flowers, CloudSMS, and GigaLayer, with the number of sites accepting this method expected to grow shortly.
While the naira remains weak, it will have more of an effect on life for Nigerians than you might have thought. Even if you normally use dollars, the rise in the cost of imported goods is likely to be something that you notice.
