Oct 30 (Lagos) - While investing in the stock market, one has to keep an eye on the exchange rate of Naira to Dollar because it determines your real rate of return due to the dollarization of the Nigerian economy mainly due to government policies over the decades.
While discussing the rosy prospects of the economy in the medium term, I told a friend to be careful because Nigerian government devalues its currency every two years. This led to argument of whether this is true of not so we decided to research on all the devaluations which have happened in the last 50 years. The results were astonishing.
At the end of it, we wondered if there is a future for us going by this evidence and if the government even cares about the people, not just this government but over the decades.
1972 $1 = N0.658
1973 $1 = N0.658
1974 $1 = N0.63
1975 $1 = N0.616
1976 $1 = N0.62
1977 $1 = N0.647
1978 $1 = N0.606
1979 $1 = N0.596
1980 $1 = N0.550 (0.900 Black Market Rate)
1981 $1 = N0.61
1982 $1 = N0.673
1983 $1 = N0.724
1984 $1 = N0.765
1985 $1 = N0.894 (N1.70 Black Market Rate)
1986 $1 = N2.02 (N3.90 Black Market Rate)
1987 $1 = N4.02 (N5.90 Black Market Rate)
1988 $1 = N4.54 (N6.70 Black Market Rate)
1989 $1 = N7.39 (N10.70 Black Market Rate)
1990 $1 = N7.39 (N10.70 Black Market Rate)
1991 $1 = N8.04 (N9.30 Black Market Rate)
1992 $1 = N9.91
1993 $1 = N17.30 (N21.90 Black Market Rate)
1994 $1 = N22.33 (N56.80 Black Market Rate)
1995 $1 = N21.89 (N71.70 Black Market Rate)
1996 $1 = N21.89 (N84.58 Black Market Rate)
1997 $1 = N21.89 (N84.58 Black Market Rate)
1998 $1 = N21.89 (N84.70 Black Market Rate)
1999 $1 = N21.89 (N88-N90 Black Market Rate)
2000 $1 = N85.98 (N105.00 Black Market Rate)
2001 $1 = N99-N106 (N104-N122 Black Market Rate)
2002 $1 = N109-N113 (N122-N140 Black Market
2003 $1 = N114-N127 (N135-N137 Black Market
2004 $1 = N127-N130 (N137-N144 Black Market
2005 $1 = N132-N136
2006 $1 = N128.50-N131.80
2007 $1 = N120-N125
2008 $1 = N115.50-N120
2009 $1 = N145-N171
2010 $1 = N148.21-N154.8
2011 $1 = N151.05-N165.1
2012 $1 = N155.09-N161.5
2013 $1 = N153.21-N162.9
2014 $1 = N170-N199
2015 $1 = N199-N300
2016 $1 = N300-N320 (N310-N370 Black Market
2017 $1 = N360
So there you have it.
From that data, we can gather that the leaders of the 70's had a better grip on the economy. In fact till 1984, Naira was stronger than the Dollar and then the fall started which has become worse almost every year since.
There was a good period during the Abacha years when Naira remained stable for 5 years but since Nigeria's got democracy, the devaluations have been sharper and steeper.
Look at the fall in the currency since Nigeria got democracy that is from 1999 on wards except a brief period in 2007-2008 when the currency actually appreciated under the watchful eyes of CBN Governor Soludo.
Going by this evidence, we should expect another devaluation around 2019 possibly after the elections are over. Today the CBN announced that foreign reserves have grown to USD 34 billion. That is how poor Nigeria has become that leaders are happy with those low level reserves.
If you compare that $34 billion reserves with the fastest growing economies of the world like India and China, we realize how much we are behind with India holding USD 400 billion in reserves and China holding a massive 3 trillion Dollars.
So going back to where we started, the lesson is that be careful while investing in stocks and be on the lookout for the next devaluation. Before that happens, take the necessary steps to protect your wealth or you risk becoming the next pauper-millionaire.
reporting for easykobo.com on Monday, Oct 30 2017 from Lagos, Nigeria
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