If you google it, they will keep confusing people with different definitions here and there. And apart from that, their explanations are half baked, with no real life examples. I believe definitions are good but many of the people making these write-ups honestly don't know what causes a currency to lose value themselves. They just copy and paste what they saw from another person's write-up. If you ask your friend why he parked out of his former house, he should tell you:
1. His rent expired and he didn't have enough money to pay
2. The compound didn't always have light
3. He doesn't like passage houses but prefers self contained houses, because his neighbours don't always flush the toilet when they use it, there is no privacy among other inconveniences...
Something concrete that you can hold on to. Is not when you ask him why he parked out from his former house, that he will start defining things here and there. So in simple terms can somebody tell me what makes a currency to keep losing value, using Naira as a case study. Even if it is not in simple terms, anybody with concrete answers regarding what is going on can explain. President Obasanjo left it at N130/$1 after 8 years, President Jonathan left it at N160/$1 after 5 or 6 years, President Buhari left it at N460/$1 after 8 years while President Tinubu has taken it to N746/$1 after 5 or 6 months

The Kan3 is trash

Very interesting question. I am coming

Keenly interested too

What do you expect from these leaders? Especially now, it's from grass to forest. Naira has lost its value.

Pay for research if you need these answers.

All these incompetent people appointed ministers who come to Nairaland to get from research data that others have suffered to do.

No free data for una again.

Forex... or Foreign Exchange is the exchange of currency

The world is a global market, no country is truly self sufficient, ..

Trade takes place for century using exchange like trade and Bater, Portuguese, Arabs, Americans and Europeans would sail down to ports of Africa with products they made like gun powder, Matchete, Dagers, Spears, cloths, bags etc to exchange for slaves, skin hide, lots of Agro commodity

There are several trade routes, the trans Atlantic, Trans Saharan, Silk road etc

Soon traders started looking for means of exchange that represented true value accross all trade route, and Gold metal a non corrosive precious metal was used as means of exchange and valuation

Your goods are weighed and quantified, and a certain size of gold is fixed as it's price in every market

After a while Gold became too bulky and pirates began attacking merchant ships with Gold...

A new solution to this is to have a Gold vault, where Gold where stored (Central bank) and the reciept of Golds in the reserves are printed as money legal tender


United States of America has the largest Gold reserve and hence Dollar became very stable and powerful, this made Dollar acceptable to traders accross the world

With the acceptability of Dollars came the crude oil trade era, and Petrol Dollars were used for trade, this even strengthen the demand for Dollars

Now Back to your question

The amount of Dollars we have in our foreign reserves or foreign bank account determines the value of our legal tender which is Naira

Each country's international transaction will add or reduce the value of there currency. Country that continurs to export raw materials will keep loosing value, but countries that exports finished goods or semi finished (added value to their products) eventually have a competitive edge against other currency. This is just out of the numerous things that can add value to currency.

Wellness77:
If you google it, they will keep confusing people with different definitions here and there. And apart from that, their explanations are half baked, with no real life examples. I believe definitions are good but many of the people making these write-ups honestly don't know what causes a currency to lose value themselves. They just copy and paste what they saw from another person's write-up. If you ask your friend why he parked out of his former house, he should tell you:
1. His rent expired and he didn't have enough money to pay
2. The compound didn't always have light
3. He doesn't like passage houses but prefers self contained houses, because his neighbours don't always flush the toilet when they use it, there is no privacy among other inconveniences...
Something concrete that you can hold on to. Is not when you ask him why he parked out from his former house, that he will start defining things here and there. So in simple terms can somebody tell me what makes a currency to keep losing value, using Naira as a case study. Even if it is not in simple terms, anybody with concrete answers regarding what is going on can explain. President Obasanjo left it at N130/$1 after 8 years, President Jonathan left it at N160/$1 after 5 or 6 years, President Buhari left it at N460/$1 after 8 years while President Tinubu has taken it to N746/$1 after 5 or 6 months

As you can see, very few even understands the situation...

No be juju be that...

Countries that import more than what it produce will like have its currency weakened, exchange rate depends on the producing capabilities of every nations....

Thanks for all the replies. I will go through all of them. I stumbled across this just now:

https://www.santander.com/en/stories/devaluation
"When money used to be gold, silver or bronze coins, it was worth the value of the metal it was made of. But as those precious metals became scarce, money needed to be made from paper, copper, aluminium, tin and other cheaper materials. Because money no longer had the same worth as precious metals, it derived its value from the wealth of the country that issued it. In other words, a euro, dollar or peso is a certificate of ownership of some of the wealth stored in a central bank."

"We mustn’t confuse it with depreciation, even though both mean one currency loses value against another. On the one hand, devaluation happens when a government makes monetary policy to reduce a currency’s value; on the other hand, depreciation happens as a result of supply and demand in a free foreign exchange market."

iammo:
Forex... or Foreign Exchange is the exchange of currency

The world is a global market, no country is truly self sufficient, ..

Trade takes place for century using exchange like trade and Bater, Portuguese, Arabs, Americans and Europeans would sail down to ports of Africa with products they made like gun powder, Matchete, Dagers, Spears, cloths, bags etc to exchange for slaves, skin hide, lots of Agro commodity

There are several trade routes, the trans Atlantic, Trans Saharan, Silk road etc

Soon traders started looking for means of exchange that represented true value accross all trade route, and Gold metal a non corrosive precious metal was used as means of exchange and valuation

Your goods are weighed and quantified, and a certain size of gold is fixed as it's price in every market

After a while Gold became too bulky and pirates began attacking merchant ships with Gold...

A new solution to this is to have a Gold vault, where Gold where stored (Central bank) and the reciept of Golds in the reserves are printed as money legal tender


United States of America has the largest Gold reserve and hence Dollar became very stable and powerful, this made Dollar acceptable to traders accross the world

With the acceptability of Dollars came the crude oil trade era, and Petrol Dollars were used for trade, this even strengthen the demand for Dollars

Now Back to your question

The amount of Dollars we have in our foreign reserves or foreign bank account determines the value of our legal tender which is Naira

The best answer so far! Foreign reserve determines the value of international transaction a country can engage in..
A country depletes his foreign reserve by importation while exportation increases foreign reserves
Countries with significant foreign reserves most times do not make use of it because they are readily self sufficient and the value of their importation is far lesser than what they export. Consequently a country like ours is bound to have a ever reducing foreign reserve until we actualize a new approach that ensures we increase exportation and reduce importation to the barest minimum.

Cc: Nlfpmod dominique Obinoscopy mukina2 Seun

Some Economics 101 for front page

correctguy101:


As you can see, very few even understands the situation...

No be juju be that...

True talk, very few understand. You are saying things as they are. Anyway my take from the whole thing sha with the help I have received so far from some of the kind responses above me is as follow:
In the olden days, money used to have the value of the material that was used in making it. In the olden days, money was made of gold, silver, bronze, copper and so on. So if a coin which was used in buying and selling in the market had the equivalent value of $500 in today's money, even if you decided to melt it at the blast furnace and wear it as a wedding ring, it would still have the exact same market value of $500. But today's money is made of paper and not gold (for example you can't eat money if you are hungry). So the worth/value/purchasing power of the currency of any country is a certificate of ownership of the quantity of wealth stored in the country's foreign reserves (whatever that means). So the more a country continues to import from other countries the more their currency continues to lose value. So the reason why Naira keeps losing value is because Nigeria is broke. US Dollar is very strong, because USA are not broke

Wellness77:

True talk, very few understand. You are saying things as they are. Anyway my take from the whole thing sha with the help I have received so far from some of the kind responses above me is as follow:
In the olden days, money used to have the value of the material that was used in making it. In the olden days, money was made of gold, silver, bronze, copper and so on. So if a coin which was used in buying and selling in the market had the equivalent value of $500 in today's money, even if you decided to melt it at the blast furnace and wear it as a wedding ring, it would still have the exact same market value of $500. But today's money is made of paper and not gold (for example you can't eat money if you are hungry). So the worth/value/purchasing power of the currency of any country is a certificate of ownership of the quantity of wealth stored in the country's foreign reserves (whatever that means). So the more a country continues to import from other countries the more their currency continues to lose value. So the reason why Naira keeps losing value is because Nigeria is broke. US Dollar is very strong, because USA are not broke

Oh..

This ancestor will not claim to know what he doesn't know. I'm a humble man...

One Igbo baba told me that Nigerian politicians are the only problem. He's not probiafra or anything as he's an old JW friend of mine.

According to this baba, he says our politicians are supposed to not receive any money for our crude but instead exchange for the things the country needs and even if money is received, they should make sure it's enough to get what the country needs from another place, Incase the werey we're dealing with refuses to give that thing.

He claims that's the relationship chairman Deng, the number one of China fostered with the Russians in the trying times of both countries.

But instead, the little non-existent digital and paper money which we know only has very little value as it's just an acknowledgement, our eediot negotiators bring in are shared and spent on themselves and their many bad habits.

Add this also and draw your conclusion. Forget about the so called foreign reserves. The parasites are sucking the country dry.

We're not the only ones invested in import.