twosquare:
China decided to keep her currency weak to the dollar to favour its economy and attract foreign companies for the sake of cheap labour.

Often, the US has accused China of currency manipulation to keep it weak (try and Google this).

twosquare:
Because then, we were export-focused economy through which we earn forex. No free lazy money like oil. Most forex are from cash crops then.

ITbomb:
When you don't produce anything that another country would need, your currency falls

If what you are producing is wanted by another country, your currency will be strong

Problem is that we depend on oil as we cannot produce any other thing, so when we were producing and selling oil at high quantities, our currency was stable.
Now that most buyers of oil are looking elsewhere, we don't sell enough to balance what we are buying from other countries, so our Naira falls

I believe this is "layman" enough

Hismasterpiece:


so the reason for our currency devaluation is because we don't export anything besides oil? But what about UAE? Isn't it the money they make from oil that's the reason their country is the way it is?

ITbomb:
When you don't produce anything that another country would need, your currency falls

If what you are producing is wanted by another country, your currency will be strong

Problem is that we depend on oil as we cannot produce any other thing, so when we were producing and selling oil at high quantities, our currency was stable.
Now that most buyers of oil are looking elsewhere, we don't sell enough to balance what we are buying from other countries, so our Naira falls

I believe this is "layman" enough

Hismasterpiece:
Hello.

Recently i have been hearing about the dollar going up in value.

And this has brought about a hike in the prices of commodities in the market and has also brought about a hike in the cost of living of the average Nigerian.

So things are tough in the country now because of this dollar phenomenon

So i would like to know what determines the value of a country's currency and why the Nigerian Naira appears to constantly reducing in value while that of America keeps going higher and higher.

Anybody with meaningful information is welcome. Thanks.

VeeVeeMyLuv:

Take for instance someone from abroad want to invest, start a company, the person will have to settle the governor, give some percentage of funds to elders, community leaders, thugs and what have you. This way, so many a investor could not invest in our country. These investors would have greatly helped in reducing the chronic unemployment (shebi u sef see how foolish these people upstairs are?).


When there is high perception of insecurity, people including the leaders, the led, the foreigners looking to invest, tourists will be thinking about avoiding the country, divesting, or trying to run away from their motherland!
FDI will be running away. Young persons who are thinking of starting a family, building house or investment will think twice or be reluctant to do that.

The moment more persons lose hope and faith on the country that is when there has to be drastic change to correct the problem.

Yes the oil export is not enough (or let's say the economic people made us believe that). In addition it has been dwindling over the years.
The world is turning to alternative green energy/electric cars. Another painful aspect is that the same export is been imported as refined fuel (of which govt claims to pay heavy subsidies).

diesel86:


That is an intentional economic strategy by china, if china makes their currency to high automatically their goods become expensive and people would start looking elsewhere to buy.

VeeVeeMyLuv:
It is not that Dollar is going up

Instead it is your naira that is diving downwards.

@ topic

1. Fisical responsibility and accountability.
2. The level of greed & corruption.
3. Human rights law.
4. Foi.
5. Ease of doing business
6. Level of insecurity
7. Amount of export to import.

I think these points are sufficient

Hismasterpiece:


so the reason for our currency devaluation is because we don't export anything besides oil? But what about UAE? Isn't it the money they make from oil that's the reason their country is the way it is?

Hismasterpiece:


so the reason for our currency devaluation is because we don't export anything besides oil? But what about UAE? Isn't it the money they make from oil that's the reason their country is the way it is?

SUPERPACK:
Export, import, demand, supply.

Hismasterpiece:


so doing business in Nigeria isn't easy? how do you mean?

how does insecurity affect the country's currency value

doesn't nigeria export oil among other things?

SenatePresdo:


Why isn't Chinese yuan stronger than that of British pounds, because China is among the major export country in the world.

VeeVeeMyLuv:
It is not that Dollar is going up

Instead it is your naira that is diving downwards.

@ topic

1. Fisical responsibility and accountability.
2. The level of greed & corruption.
3. Human rights law.
4. Foi.
5. Ease of doing business
6. Level of insecurity
7. Amount of export to import.

I think these points are sufficient

Hismasterpiece:


so doing business in Nigeria isn't easy? how do you mean?

how does insecurity affect the country's currency value

doesn't nigeria export oil among other things?

Hismasterpiece:


so the reason for our currency devaluation is because we don't export anything besides oil? But what about UAE? Isn't it the money they make from oil that's the reason their country is the way it is?

SporaD8:
Gross Domestic Product, Balance of Payment and Foreign Reserve.

SUPERPACK:
Export, import, demand, supply.

Olumyco:
This is Economics 101.... Demand and Supply.

Actually the question should be relative value and not just value.

To understand it very well. Let us see Dollar as a commodity. If there is a shortage of Dollar and we don't want it to finish, what will be done is to increase the amount of money to buy it.

If I need 2 naira to buy 1 dollar, the way the dollar will finish... infact within two days all our dollars in our foreign reserve will get depleted. But if I need like 10 naira to buy 1 dollar, the demand for it will reduce. If I increase to like 100 naira, the quantity of dollar that will be bought will reduce.

So what CBN does is to regulate the amount of money needed to purchase the dollar so that it won't finish faster and can also be commensurate to how the dollar flows in. So its a balance of rate at which dollar flows in and flows out.

Therefore the reason why naira is low compared to dollar is simply because:

1. There is low supply of dollar

Solution
a. We need to increase our export by becoming more heavily industrilized. Exporting raw materials won't make us achieve this. We need to export more finished goods and services.

2. There is high demand for dollar

Solution
We need to decrease our import by becoming industrialized also which will make us produce and consume locally without the need to import everything we consume in the country.

Facts

Things that take away our dollar

1. IT: Phones, Electronic gadgets etc are imported

2. IT: Hosting websites, buying domain name etc

3. Many sends their children abroad to go and school

4. Medical Tourism

5. Some people uses their naira ATM to withdraw dollars abroad. The deduction falls on our foreign reserve.

6. We export crude oil and import refined oil. It's terrible

And so on...

Measures Used by CBN to control this

1. The CBN tries to control this by reducing the amount that can be transacted in dollars per day which is 100 dollar.

2. Refusing to give dollar to importers who wants to import what we produde already in the country

3. Banning of illegal forex organizations

And so on.

Another Solution to this

1. The government should encourage remote work by encouraging people in the IT space to do remote work with foreign companies.

2. The government should ban some imported goods to allow locally made goods to thrive

3. The government should study the goods and services we import, then try and get a foreign investor to come and establish the company that produces such or render such services here in the country.

4. The government should stop politicians from seeking medical support abroad.

And so on
Thanks.

olalekan1:
Many people don't understand the effect of exchange rate speculation on the price of goods and services in this country. See below

Assuming you buy and sell phones, the phones are all foreign manufactured phone; by implication, you need to convert your hard earned Naira to the foreign currency e.g. dollar. Assuming you invested 20 million naira and this was when 1 dollar is being exchanged for 300 naira. This implies that your 20 million naira when converted to dollar is 66,667 dollars.

Your goods arrived and you decided to sell them within the possible shortest period so that you can re-stock. While waiting for buyers, you started hearing that one dollar is now 400 naira or 500 and so on. As a business man that does not want to run out of business, what will you do?

As business man, you will definitely increase the price of your old stock. If you failed to do this, the 20 million naira you invested will not be able to purchase the quantity of phones you had initially bought when the exchange rate was 300.

As a business man, you have done the right thing to protect your investment but this action will have effect on the purchasing power of the consumer.

That is how the trend will continue because the consumer too will increase their own price of whatever goods or services they are offering so that they can be able to get what they need.

This is inflation and the only solution is that we patronize our own products and services else we will continue to cry while we enrich foreign economy.

Hismasterpiece:


so the reason for our currency devaluation is because we don't export anything besides oil? But what about UAE? Isn't it the money they make from oil that's the reason their country is the way it is?

ITbomb:
When you don't produce anything that another country would need, your currency falls

If what you are producing is wanted by another country, your currency will be strong

Problem is that we depend on oil as we cannot produce any other thing, so when we were producing and selling oil at high quantities, our currency was stable.
Now that most buyers of oil are looking elsewhere, we don't sell enough to balance what we are buying from other countries, so our Naira falls

I believe this is "layman" enough

Hismasterpiece:
Hello.

Recently i have been hearing about the dollar going up in value.

And this has brought about a hike in the prices of commodities in the market and has also brought about a hike in the cost of living of the average Nigerian.

So things are tough in the country now because of this dollar phenomenon

So i would like to know what determines the value of a country's currency and why the Nigerian Naira appears to constantly reducing in value while that of America keeps going higher and higher.

Anybody with meaningful information is welcome. Thanks.

cloud:
the only difference is that unlike Nigeria, UAE does not import refined fuel back to the country. Remember that this imported fuel is paid for in scarce dollars.