As at the time of writing this article, the present exchange of the naira to other foreign currency is nothing to write home about and i must tell you that this is a bad sign, too sad that not too many Nigerians care to know how this is going to affect them.
What is currency devaluation ?
Currency devaluation is a deliberate downward adjustment of the value of a country’s currency against another currency.
Devaluation is a tool used by monetary authorities to improve the country’s trade balance by boosting exports at moments when the trade deficit may become a problem for the economy.
Why countries devalue their currency.
Now to get a better understanding lets us now get deeper as to why currency devalue their currency.
1. To Reduce Debt Burdens.
If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time.
2.To Shrink Trade Deficits.
Exports will increase and imports will decrease due to exports becoming cheaper and imports more expensive.
3. To Boost Exports.
On a world market, goods from one country must compete with those from all other countries. Car makers in America must compete with car makers in Europe and Japan.
If the value of the euro decreases against the dollar, the price of the cars sold by European manufacturers in America, in dollars, will be effectively less expensive than they were before.
How To Protect Yourself.
Currency devaluation may lower productivity, since imports of capital equipment and machinery may become too expensive.
Devaluation also significantly reduces the overseas purchasing power of a nation’s citizens.
Now the big question now is, How do i protect myself ?.
1. Start earning in another stronger currency.
You may thing that this is not possible but let me tell you that it is true, there are lucrative business you can venture into that will yield you foreign currecncy and some of them are, Blogging, crypto-currency and so many others.
2. Purchase Assest.
so-called “hard assets” (namely gold or foreign currency), durable goods, or property that produces income is valuable in a situation where a nation’s money supply is threatened.
Property has several things going for it. You can short money with it, that is to say you can borrow to buy. This is especially good if you can fix the interest rate. Property is also getting cheap these days after years of falling prices. Property also has an income stream attached to it if you rent it out, though in really bad times this can go south if rent controls raise their ugly heads.