Posts

Saving In Local Currency Vs Saving In Foreign Currency

avatar of @attentionneeded
25
@attentionneeded
·
·
0 views
·
2 min read

The most common ways for youths to save money now in Nigeria is either through cryptocurrency (stablecoin) or through domiciliary account it can either be in dollars or any other foreign currency but however, but some still don’t have this idea and the truth be told I got to the idea not too long because it’s just about 2 years now I started doing that. Sometimes when people hear “save your money in dollars” in my country Nigeria they ignore or frown at it not because they choose but because of some basic reasons are;

The system of creating a domiciliary account in the country is so stressful that you would prefer to save the money in local currency savings (which is not advisable). The process will involve you getting two or three persons that also have a domiciliary account or a current account and getting these don’t always come easy because just as you are avoiding the stressful process, others are also avoiding it.

Another reason is the exchange rate; the bank exchange rate in converting from local currency to foreign currency is very low compared to what the black market offers. So in order to get a higher or preferable one, you have to look for a good rate at the black market. However, the problem with this isn’t the youth because it can be easier for them to do the walking around but not for the elderly/advanced who can’t handle the stress of it.

Why Saving in Local Currency Not Advisable.

The reason why it’s not advisable to save in local currency in Nigeria is because of the rate at which the currency is reducing in value. Due to economic factors and inflation, the currency is losing its value either weekly or monthly when you decide to save your 1,000,000 Naira in the bank it’s just there losing its value. If the 1,000,000 Naira could afford 500 cartons of beer this month, next month it would probably afford just 100 – 200 cartons. That’s how the value is dropping.

The Benefit of Saving in Foreign Currency

I won’t really explain much on this but just give an example first of all, the rate of naira to dollar selling rate is 610 in the black market and buying rate and buying rate is 580. Last month's buying rate was around 570/575 and the selling rate was about 580. Now imagine you 1 million Naira last month and you bought a dollar at the rate of 570 which will give you about $1,754 and now this you want to sell the dollar at the rate of 610 guess what? It will give you 1,069,940 naira.

Now think about if you had bought the dollar a few months back at a lower price than the 570 or when it was 500 and calculate the profit you would get now. That’s why it’s important.

Posted Using LeoFinance Beta