The Naira-Dollar War... On Investing in Foreign Currency.

The Naira-Dollar War... On Investing in Foreign Currency.

Should you invest or save in dollars to escape Nigerian inflation?... (Issue 12 on Investment Rants with The Viral Author)

We were just having a good time in Denu's Money Circle WhatsApp Community when suddenly one investor dropped:

Please encourage me to save in dollars???

For the next one hour and some thirty minutes, the circle went hot with several long comments passed to and from, but not limited to, Investors Denu Bon , Pascal Chidi , and Chiagozie Mbonu .

It was I that went first, obviously, I had wanted to rant on the ongoing trend among marketers who keep increasing the demand for dollars by heightening the fear of innocent and simple financial minds about how naira was doing bad against the dollar (obviously, it's doing really poor) and still keep blaming the government of the nation for the fall of naira.

Now, before you crucify me;

This is just a rant!

And, I am entitled to have my honest, factual opinions, especially since I don't have any portfolio in dollars yet (only social capital), I think I have the good spectator glasses to observe things panoramically in a capacity day traders of the dollar may not be able to see.

I replied to Investor Pas,

Na wu dey save go save in dollar??

And, truly, that's a fact!

I have found out that a lot of us en, we overthink things we do not have at our disposal above things that are right on our bedroom desk!

Persin wey no get UK visa dey worry about UK cold. Baba, how far? ??

Well, the following lonnnnnnggggg conversation ensued. I wish you an insightful read just like you would listen to a lot of people arguing back and forth. It's so educating, yet rant-like, and that's the spice.

"I think this dollar thing should be approached in a 50-50 mindset," said Investor Dee (oh, that's me!), "Investor Chi what do you have to say about the monetary policy stunt pulled by the CBN as an accountant, I've been reading up on it?"

"I was still discussing this with some of my colleagues," Investor Chi revealed.

Then I go, "Please, let's hear some wisdom. Personally, I feel it's a political stunt, dicey tho."

"However, in June I kinda forecasted that a monetary policy would be raised towards the end of the year. Who remembers TP GLOBAL FX financial summit that was held in June?" I added.

Investor Integrity N. remembers. Oh, you don't? See below the poll created in the month of May 2022 by Mr. Chukwudi Obiri , the Country Director for TP Global FX in Nigeria:

And here was my reply, now I know I am led by the Spirit of God (ha ha, plus Mr. Chuks promised to gift the winner $100 which by today's rate is roughly 74,000 NGN, so my readers, help me tap on the picture below and remind Mr. Chuks that I won the prediction ooo ??)

So, welcome back!

Now, you remember TP Global FX.

See what Investor Chi said about the monetary policy:

We can compare this country to a motor vehicle with a damaged engine.?Then the president can be likened to the mechanic. After spending so much on the engine the mechanic and his team thinks of how to improve the performance of the car. They went ahead to spend money on upgrading the car interior. They painted the body of the car. They even bought plenty fuel….??. They serviced the engine knowing fully well it is damaged.?The fact is that mechanic knows that if he does not do all those activities, you won’t pay him and won’t praise his effort. Las las, the mechanic confesses that the engine is damaged. Instead of replacing the engine, they wasted all their resources trying to fix the engine. Our deficit budget at the moment is a big problem for the next administration.

Now, to a very insightful point that she made:

"The redesign is good, but it won't solve the kidnapping, vote buying, and the likes they mentioned. Kidnappers can ask for Dollars or ask for the new designed notes, a politician can get the new designed notes anytime they won't and stockpile it and even make it scarce. They can even convert it to dollars to cut their loss.

"If we want the naira to grow, we must look inward and grow our export. Bring up a economic plan that will help major manufacturing company source their raw materials locally, this will reduce the need for FX. Most manufacturing companies in Nigeria import over 80% of their raw materials and they don't import that the final product," she concluded.

But I had an argument. Then, I resolved it was a concern.

Before I could raise it, Investor Chi said this:

Major factor is if we export more. If we export more,?countries we trade with will have to convert to naira. This will result in the increase in the naira demand. Increase in demand will boost its value.

"Meanwhile, let’s not put mind to Finance Bill 2023 yet cos I heard not much plan is in place for it yet. As this government is going the new govt will be fine ??.?None cares about this economy again. Dollar and Pounds are competing in Nigeria," Investor Chi continued.

Finally, I finished typing my concern and I said:

"Now the CBN have done what they did, and the truth is, whether we like it or not they're backed up by law to come up with monetary policies to their best understanding of the perks it'll bring to the nation as a whole. And, another truth is, even at the instance of a logically and widely accepted fixing of the nation's economy as you have so stated, the naira will still be, at the first few months of rescue, at loggerhead and will be crashing really bad against the dollar..."

"But I'm sure of one thing. The CBN move has a political backing if you ask me. How do I mean? It's known to all and sundry that the mode of buying vote in Nigeria is the us of Nigeria,?plus alot of politicians have been?burying money especially naira to be spent during election to buy vote. So, I believe that CBN want to use this medium to retrieve some of?those money and to render the money useless if possible.?Imagine someone that have kept 1billion naira somewhere election purposes, surely such person can't take it to bank neither will exchanging it to dollar reasonable. My thought though," Investor Chi interrupted.

"...Then, another concern I have is, what is on Google. In the black market and other trade points, the exchange rate ranges from 830-680... However, on the official exchange portal, we see a meagre 1$ to 433naira. What do you have to say about this?" Investor asked tentatively.

Just before I continued with the concerns I had, Investor Chi chipped in again:

But again, it's black market that is actually making dollar highly expensive. They actually contribute to it.

To which I retorted with the following statement sharply:

Just the same way they do in real estate and petroleum, induce demand by raising awareness and reduce supply. Whatever is left is priced high.

And if you read my post on The Real Truth Behind Real Estate Business/Investment, you won't agree any less.

Almost immediately, I drifted back to where I started from about how the CBN are backed up by law to raise monetary policies and I asked:

"Also, back to this, is the best solution for citizens of the nation to convert all their monetary assets to dollars, I see a whole lot of uneducated folks doing that already (mainly because of the short-term profit), isn't there a possibility that soonest, especially with the misleading official exchange rate, $1 falls back to 400 or even less? What should be the position of long-term investors like us?"

"Also, we can say the CBN wants to reduce the supply of naira ooo. Omo..." Investor Dee continued.

Remember Investor Chi is an accountant, I mean a verified practicing accountant. And, for the first time in my dollar-naira spectating life, I had someone said something that sounded really insightful and awesome about the whole brouhaha

To be honest, I feel it's foolish to do this (convert all their monetary assets to dollars). I always advice people to invest in investments that will yield profit. Investing in dollars is like gambling ooo, if it falls today, many people will cry. Dollar will definitely drop after election but will not drop as far as 400 per dollar.

Well, I really felt like entering the private chats of every Investor member of Denu's Money Circle to tell them that they should, "Invest in profit yielding ventures. In manufacturing. In businesses, etc..." but I couldn't be entirely true because, "I think it also has to do with the preference of the investor, and the purpose of investing," plus

Just the same way in forex trading we have Day traders and long-term hoarders, in dollar and its business too, there are those dealing with the short-term mind frame. However, a lot of persons rush into stuff without understanding what their position is. Because of hype and marketing, they get into things and go all in just because they want to make crazy momentary?profits. Reference to the crypto crash. How many traders committed suicide because they migrated all their assets into crypto.

Investor Chi agreed, "that's the gambling part to me."

"Sure," came from Investor Pas.

Then, on my claim that CBN wanted to reduce the supply of naira, Investor Chi said:

"Not really, the aim is to get people to bring out all the money they are hoarding so that there can be circulation of funds. It's the scarcity of fund that contributed to this hyper inflation."

Just like you noticed, Investor Pas, a founder and CEO Investor member of DMC, have been silent all this while. And, it was he that practically started the conversation o.

"Depends on what you mean by investing in dollar.?Investing in dollar is not about the dollar rate," he suddenly contributed.

"As far as I am concerned, saving money in dollars is as good as keeping idle funds," Investor Chi retorted.

It was Investor Pas that now observed: "Now we've used 2 different words; saving and investing."

And, the conversation took a different turn.

Investor Chi began, "you and I know that many people who claim to convert all their money to dollar in other to take advantage of this daily hike in rate call it investment."

"The money being saved with PiggyVest, would you want to know where it is going?" Investor Pas asked.

If you are a member Investor of DMC you will know that we follow a money management principle called the #10_10_10_70, I always talk about it and you can find it in other issues of this rant's newsletter, and that we use Piggyvest, for now, to keep and save our 10% toward investment. So, this question was pretty attacking to our entire purpose as a group. Ha ha. But I replied first.

"It goes into day trading... That's system in place."

"They trade with it," followed Investor Chi.

"Daily trading," Investor Integrity also said.

"But they have the system. You can't just wake up one day and become the system..." I was replying to Investor Chi.

"In what currency?" Investor Pas asked again.

"No one works with piggy here na. Not just one currency. Entire forex market," this time, I was getting pissed a bit. I don't know why. But, definitely, I cannot be mad at my Investor Pas, it's just the argument that is beginning to get on my nerves.

Ignoring the question, maybe deciding I had given a better reply, Investor Chi said, "So Investor Dee talked about converting fund to dollar and keep."

"Yes. I was also going to talk about the misplacement of the words, investment and wealth," I had replied.

"That was my mistake," she said, acknowledging she replaced both words in rasing her arguments.

"Wealth is liquidity. One. Two, investing is the system you set in place to build wealth. Now, connect the two," I started,

From this, we'll be able to understand that every single person needs to have an actual income source. You can have as many. The income you earn is what you use to make investment choices that help you build wealth, the money you have left when your capacity to earn is stopped.

Only to be interrupted by DMC's president, Investor Integrity N. asking to know when Investor Oluwafunmibi Adeola would be talking about her shoe-making business service. Yes, this is one of the features of being a member of DMC, we are creating an ecosystem to ensure money revolves round the circle and are really intentional about this in our current 1 million in profit sales challenge. Plus, we also live by this principle, 'Investors helping Investors,' where Investors help promote their colleagues' products, services and business offerings in return for a commission.

Anyways, I continued.

"So, I think it is a foul to approach things like hopping on the mass profit from naira and dollar brouhaha a form of investment. No. I go with Investor Chi. It's gambling and no matter how marketed it is, or popularize, your hunger is more like the core deciding factor to how you go all in."

"However, to be safe, things like that can be approached on a 50-50 mindset. 50% of my monetary assets, dollars. 50% valued in naira. Kinda like striking a balance, but this is in no way a professional financial advice, I'm just ranting," I concluded.

I justified the reason for my conclusion by saying:

So, when there is problem in either currency, the other won't be affected and I won't be at a total economic loss.

Having said all, I asked,

"What do you say Investor Chi and Investor Pascal?"

"The financial system of Nigeria doesn't warranty young millionaires..." Investor Pascal was saying.

"You have said it all Investor Denu"

I didn't quite understand when Investor Pascal continued with, "For you to become, you've got to break out of the system. And for once, it was the opportunity to tap into the American financial system," (italics mine) but I first responded to his talk about Nigeria and young millionaires.

"Yes ooo. I can't wait to be a millionaire sha."

And then, registered my confusion on the follow-up point.

Investor Emmanuel Ajibola Fakayode , a 19-year-old member of the circle, summarily said:

"We need to make a striking balance between two 50-50. Thank you so much for dishing out values tonight. Investor Chi,?God bless ??"

"85% of Fintech companies in Nigeria indulge in fraudulent activities just to make profit.?No company read out earnings in naira. In naira when you have two million it's just four thousand in dollars," Investor Pascal was responding to me.

"Hold on, EFCC is all out for them now," Investor Chi stopped him.

"The fact that many are doing it wrong doesn't justify why we should do it same way. There are many people who are doing it right and are making it," she concluded.

"Exactly.?We can still stand out," Investor Integrity said out of the blues.

"True," agreed Investor Pascal.

"Which is why we need to start building our future now," she started saying and,

Start now, no matter how small it is

More like the perfect time to tell you, dear reader, to anticipate the second edition of Start Your Purse to Fattening, which promises to be action-inspiring and really reviving for your personal finance life in a capacity this newsletter may not be able to.

Investor Pascal replied to Investor Chi:

"True but broaden your view."

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