Why You Should Make Money In US Dollars - Expert Advice

How To Make Dollars In Nigeria - Learn Practical Reasons You Should Not Only Be Making Money In Naira But Earn In Dollars By Following Our Blog

If you are looking for a guide on how to make dollars in Nigeria, here is my unbias analysis of reasons you should do that now and my 3 tips to get started.
You will agree with me that Nigerians are currently experiencing a hard time as prices of almost everything have gone beyond the roof with no assurance that it will reverse anytime soon.

As SaharaReporters puts it "Nigeria's economy is in crisis. The naira has fallen over 50% in the last year alone. Oil revenues, the mainstay of Nigeria’s foreign earnings are at their lowest in the last two decades."

An ordinary man who is earning N100,000 monthly can't maintain the standard of living he enjoyed 5-7 years back or even have at least N20,000 to save in a bank account for future planning. No thanks, to the inflation rate reported to have touched an all-time high of 18%.

Let's do a simple calculation:

As at when I wrote this article, you could buy a bag of rice for N20,000 against N10,000 price level between 2010-2013, a surge by 100% caused by rising importation cost.
For someone earning N100,000 within those periods, that means, one could be left with N90,000 for other personal or household expenses. But now what happens? that net income has reduced by 11% to N80,000.

Hold on a bit! let's extend our bag of rice to other expenses like daily transport to work, shopping, etc, what do you think will be left after incurring all these expenses? absolutely nothing.

The Big Question?

Will this trend continue? Going by past trend, prices are not showing any sign of reversal as evident in the US/NGN exchange rate.
You and I know that 70%-80% of what we buy, eat and wear, in Nigeria, are imported from abroad which means, they are paid for in US dollars.
In a nutshell, I can say that prices are influenced by the exchange rate.

How exchange rate affects product prices:

Like I said earlier, between 70%-80% of what we consume are imported and as exchange rate surge higher to N485, as at 10/12/2016, importers tend to factor in rising cost into the wholesale price which, eventually, drive the retail price to end users to the sky. This is just a summary of why prices are higher year-on-year (YoY).

Why USD/NGN exchange rate is rising:

Take a look at AbokiFX (the most popular exchange rate reference site that collects average US dollar, Euro & Pounds rates to Naira in parallel and CBN window on a daily basis), compare exchange rates on a monthly basis, you will see how Naira has lost sharply against major currencies.

Besides, 2016 recorded the biggest decline in history following currency scarcity (as CBN policy restricts sales to $8000, from $15000 initially proposed and DSS crackdown on Bureau de Change), increasing demand from parents (to pay tuition fee abroad), importer (to settle maturing letter of credit), businesses (BTA), online shoppers (to pay on foreign merchant websites), airline (to repatriate funds back to host country), etc and lower inflow from oil earnings and remittances from Nigerians in diaspora.

An article from Saharareporters titled; Buhari- This Economy is Struggling, will help you understand the dollar supply and demand gap currently accounting for exchange rate surge to more than 200%.
As culled from the post:

Background of Nigeria’s Economic Problems (Why the Naira has fallen by 50%)

...The Naira – dollar exchange rate is not some arbitrary number determined by bankers or governments. It is not set by diabolical traders in dingy rooms, or by “greedy” Bureau de Change (BDC) currency dealers. It is set by the laws of demand and supply on the streets of Lagos, Port Harcourt, Aba, and Kaduna. Just like the price of bread is determined by the total number of loaves of bread baked (supply) and the total number of people wishing to purchase and eat bread (demand), the dollar exchange rate is fixed by the total amount of dollars available in the Nigerian economy (supply) and the total amount of dollars demanded within Nigeria. 

Nigeria gets all its dollars from four main sources – remittances from overseas-based Nigerians; earnings from oil exports; earnings from non-oil exports; and Foreign Direct Investment. To understand the problem we are in, we must begin the story from 2013 – the last time oil was $100 per barrel. 

In 2013, the total dollar earnings coming into Nigeria was about $70 billion dollars a year, made up of  $21 Billion from remittances; $40 billion from net petroleum earnings; $3 billion from non-oil exports and about $6 billion from Foreign Direct Investments. This was the dollar supply as of 2013. What about the demand side? Well, we know that story well. Nigeria’s official imports came to about $54 billion in 2013. Add to that, non-recordable transactions such as – homes purchased overseas, school fees for students in overseas institutions, dollar demand for travel and vacations, which we estimate at about $6 billion per year and the total dollar demand in Nigeria is approximately $60 billion per year. As of 2013 therefore, the difference between the dollar supply and dollar demand was about $10 billion dollars. We had a healthy surplus of $10 billion per year which we could save as reserves. 
For those who will do the math and wonder why Nigeria’s earnings from oil in 2013 were stated as $40 billion and not $84 billion per year (which is what you get by multiplying $100 per barrel by 2.3 million barrels per day), here is the reason: Nigeria does not produce oil directly. We do it through joint venture partners like ExxonMobil, Shell, Chevron, and AGIP. Their production cost per barrel is about $20. After deducting production costs, the profits are then shared 60:40 between Nigeria and the oil majors. So, here is the math: at $100/barrel, with a production cost of $20/barrel; the gross profit left after the oil companies deduct their cost is $80 per barrel, which would then be split between the companies and Nigeria at a 60:40 ratio. This means that at $100 per barrel, Nigeria gets about $48/barrel (60% of the $80 gross profit per barrel) – which translates to about $40 billion per year. 
At the current oil price of $30 per barrel, the gross profit is only $10 per barrel after deducting the $20 per barrel production cost. Remember that Nigeria takes only 60% of the gross profit? Well, what that means is that Nigeria gets $6 per barrel, which translates to about $5 billion per year at 2.3 million barrels per day. This simple math lies at the heart of all of our exchange rate challenges because we now have an acute dollar supply problem. If we repeat the math on dollar supply, remittances are still about $21 billion per year, FDI is still about $6 billion per year, non-oil exports are still about $3 billion per year but oil based export earnings have now dropped from $40 billion per year to $5 billion per year. The total dollar supply is now $35 billion, half of what it used to be in 2013. 

Because the dollar demand has not changed, we have now gone from having surplus dollars of about $10 billion per year, to a deficit of about $25 billion per year (i.e., dollar supply of $35 billion less the dollar demand of $60 billion per year). This means there is more Naira chasing fewer dollars. Nigeria’s dollar supply, therefore, dropped from about $70 billion per year to $35 billion per year – a 50% drop. In a perfectly elastic market, we should, therefore, see a corresponding devaluation of the Naira – which is what has happened. The rate has gone from N195 per dollar to about N300 per dollar, a change of about 53%. 
I guess this piece opened your eyes more to the reason USD/NGN exchange rate is still on an upward trend. A friend predicted that the value may drop to N500 as long as demand outweighs supply.

The Risk and Opportunities

For someone earning in Naira, there is a high possibility that your standard of living will drop while the cost of living increases continuously as prices tend to the north. I have already explained how that happens (refer to paragraph 4, 5 and 6).

Where is the opportunity?

Let's spot the opportunity like this. Assuming, you have $100 in your pocket in 2013 when $1 equals N195, that's N19,500, right? Yes!
OK! how much do you have now if you had saved that same figure in a domiciliary account, now that $1 equals N485? N48,500, up by  148.72% profit in 3 years.
Did you see that opportunity now?

How To Make Dollars In Nigeria

Save, Start a business and invest in a market that makes money in US dollars.
This is exactly why I created this blog for people looking a better and legitimate ways to make more money and earn in US dollars.

Share your comment, let's talk about what you've learnt from this post.