The Naira is falling.
Why?
The oil and gas industry is the base upon which Nigeria’s economy stands, so when a combination of the shale boom in the U.S. and weaker demand worldwide pushed the price of oil down, Nigeria got hit in a pretty bad way. About 75% of Government revenue comes from our crude oil sales. So when oil prices fall, oil revenue falls too, and that’s bad for the economy.
How does it affect me?
If you generate revenue in Naira and incur costs in dollars, this is a bad time for you. Any activity that has you converting Naira for Dollars will hurt you way more than a few months ago. Given that Nigeria is heavily dependent on importation, importers have to pay for their imported goods in dollars and dollars just got more expensive, the cost of their goods have increased overnight. This is why the prices of goods have started increasing in the local stores around you, the situation will lead to inflation.
On the other hand, if you earn in Dollars and incur costs in Naira, you will wear a bigger smile to the bank.
What can we learn?
- The world runs on semi-convoluted economic rules that people do not even really understand. And whenever people fail to properly understand anything, fear creeps in. A lot of the inflation that will happen over the coming months will not be due to Nigeria’s crisis in itself, but due to fear. I have thought deep about the global economic scene and concluded it is all a scammy affair, but I am not ready to speak up publicly yet. (That is why when men want to live and die for money, I pity them seriously.)
- The US Dollar remains the de facto default currency in the world, perhaps it is best if we all started thinking about our money in terms of Dollars, I usually tell my friends that I am not interested in building a billion Naira company, I want to build a billion Dollar company, that is the type that remains relevant globally.
- You can earn in Dollars and incur costs in Naira. You can get paid standard US Dollar wages while living in some remote Nigerian village that has decent power supply and fast Internet connection, this is not fantasy, physical location is now so irrelevant that I do not know why people still cramp themselves into the “big” cities like Lagos and Abuja.
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Watching The World
It is not just Nigeria, Russia is also having a helluva time.
Russians are reportedly bum-rushing malls to swap cash for washing machines, TVs, or laptops—anything that seems as if it might hold value better than paper money, whose worth is evaporating in real time.
