Navigating Through Nigeria’s Volatile Exchange Rates and Naira Devaluations as Business Owners
There are many reasons for venturing into business today. If your aim as a business owner is to be among the global top 1% as defined by Knight Frank’s Wealth Sizing Model, you must have about $70,000 net worth in Nigeria, $20,000 net worth in Kenya and the highest is $7.9m in Monaco. This net worth varies according to countries' levels of wealth.?
As a business owner in Nigeria, achieving a net worth of $70,000 may seem unrealistic, as you have inconsistencies with the Nigeria exchange rate, inflation, and socio-cultural factors to contend with.?
According to the World Bank, macroeconomic challenges affecting growth in Nigeria are questionable exchange rate management and the shortage of foreign exchange.
A Nigeria naira from a band of 380 NGN and 381 NGN to $1 in July 2020 has continued to fluctuate and consistently devalued against the US dollar in recent times, to the frustrations of Nigerian business owners.?
This devaluation in naira, however, varies by market. The Federal Government of Nigeria in 2016, due to the oil price crash, multiplied the Nigeria Foreign Exchange market to avoid high official devaluation of the naira. Hence, the official price of a US dollar is different from the black market.
This gap is further widened by the Federal Government of Nigeria's subventions of the official market. While the official price is 410 NGN, it remains 560 NGN on the parallel market. The aim of Nigeria’s exchange rate unification is thwarted.
These as the basis of my article will be explained on two pillars - self valuation and pathway through the inconsistencies of Nigeria exchange rates and inflation. I have received a handful of questions in this regard in my inboxes.
To begin with, the first pillar, which is the self valuation for wealth, is basic. Wealth, as an abundance of riches, is relative to individuals. How individuals define wealth in relation to their goals determines how they manage the challenges of the inconsistency of exchange rates, inflation and government monetary policies that affect their market as business owners and entrepreneurs. Their concept and wealth goals will help them navigate through these barricades with manageable losses.?
Hence, to manage these challenges, there must be an objective that does not necessarily have to align with the Knight Frank Wealth Sizing Model. Business owners have the latitude to operate based on their defined goals.
Now that we have established the importance of personal valuation of wealth as a step to overcoming the inconsistencies of Nigeria’s Exchange Rates and Naira Devaluation, there are four other major steps available to business owners in Nigeria according to my experience dabbling in this terrain as well as research actively sort, they are:
Increase Exportation?
The shortage of dollars today is a result of low prices for oil, which is our main export. The world is currently moving away from oil to other renewable sources of energy, and Nigeria, with other African countries, cannot but explore other mineral resources to export in order to maintain their economy.
An example is Nigeria's growth in the third quarter of 2021, even as crude oil production dropped from 1.61 million dollars a barrel in the 2nd quarter of the year to 1.57 million dollars a barrel per day in the 3rd quarter. This is the result of growth recorded in Nigeria's non-oil sector. The non-oil sector grew by 7.95% than that of the third quarter of 2020.?
Among Nigeria's non-oil sector is Nigeria's media and entertainment industry, which over the years, is fast becoming the country's greatest export. According to the International Trade Administration, Nollywood is the second most prolific film industry in the world. And as of 2021, PwC pegged 2.3% and about 239 billion naira as Nigeria film industry's contributions to the country's GDP.?
领英推荐
The motion picture and music recording industry exceeded the 2020 projection of $806 million revenue. It contributed about 730 billion naira ($1.8 billion) to the country’s GDP. And in all,?artistes, such as Wizkid, Burna Boy, Tems are not just Nigerian artistes, they are globally recognized.?
This increasing growth in the media and entertainment industry is supported by growths in the manufacturing, agriculture and all other non-oil sectors of the economy. Hence, Nigerian governments and Nigerians need to intensify efforts on creative development, manufacturing, agriculture, renewable sources of energy, and trade, amongst others, to support the continuous growth of the economy and as well increase the inflow of dollars to the country.
Business Diversification?
There are different ways of diversifying one’s business these days, but I will explain two:?
Diversification through channels of distribution and promotion and?
Diversification by mode of production
Diversification into businesses that do not require foreign importation and or emphasising inter African trade of resources and production is key in naira emancipation. Are you an entrepreneur who thrives solely on foreign materials for production? You can begin to explore African countries with similar resources to achieve the same quality of products without having to compromise quality. This, in the long run, will help the flow of naira and promote inter-African trade.
Another way of optimizing one’s finance is through online retailing and selling. This will allow you to sell across borders and as well receive payment in dollars.?
Autochek Africa, as an example, we have a physical presence in almost all areas in the west and east of Africa, yet it is known as a digital retailing company. This is because 99.9% of our transactions can be done online. Are you looking to buy a new car or key into our auto finance? They can be carried out online.
Skill Enhancement?
As a skilled individual, to beat the inconsistency of the exchange rate, one could get a job that pays in dollars by acquiring high in-demand skills. There are several jobs that are in high demand across borders and they include coding and software development, artificial intelligence, networking development, research, content writing, graphics design, and a lot of other skills in the arts and entertainment industry.?
This is because the world currently enjoys the free flow of work beyond borders and, as such, physical presence is no longer a rigid requirement for jobs.
Investment
Easy and secured investment platforms are better friends of successful business owners, as they are platforms to help them multiply their income without much ado. There are different investment platforms today than they have ever been. As a business owner looking to explore investment platforms, ensure you trade and invest cautiously so as to protect yourself from falling prey to scammers, and, in the end, lose everything.
Conclusively, as volatile as the world economy is currently, opportunities abound for entrepreneurs in globalisation and economic shifts. It is no longer fair for you as an entrepreneur to restrict your source of income and live at the receiving end of naira devaluation. Therefore, explore the above-mentioned ways of diversifying your income and research the most effective way. The sky is your starting point.