One major development dominating economic news and media discourse this week is the unification of Nigeria’s exchange rates. Wchich means that, the exchange rate between the naira and other currencies will fluctuate based on how much people want to buy and sell the naira.
With this new policy, we understand that you may have some questions. Part of our job is to help you understand the economic landscape so you can make the best long-term moves with your investments.
First, let us be clear: the recent changes made by the CBN under the new administration are very much welcome. They will help make dollars less scarce, improve exchange rate (FX) sourcing and liquidity and make it easier for anyone to get FX for their needs, whether for business, trade or investment.
Secondly, without being carelessly speculative, the unification of the exchange rate, like we said last week, is simply the CBN recognizing the market reality. We said last week that the official rate would come to meet the market rate, which has not only started happening but will be accelerated by the recent move to unpeg the Naira. Already, rates have depreciated over 21% in the Investors’ & Exporters’ (I&E) window and have also depreciated to almost ₦760 in the open market. We expect these trends to continue in the short term.
In the long term, here are the ways we will respond to the market realities as things change:
- We will keep an eye on the long-term trends in the naira and dollar rate and add more Naira investment options, including a Naira wallet, to create more flexibility for our users.
- With a more liberal exchange rate policy, switching from Naira to USD and vice versa or withdrawing in any preferred currency will be easier and more straightforward.
- We will also increasingly launch more products that allow diaspora Nigerians to invest more readily into the local market whether via Nigerian stocks, real estate or private businesses. Some of these were already in the works, with a sister product called Assetbase launching in a few weeks and a few others are coming soon..
However, for those worried that these policies mean that your FX investments will lose value, that is not the case. Here are the reasons:
- The Nigerian economy is still reeling from recessionary shocks and low growth. Your investments on Rise are not only about their value in dollars but also about tapping into growth in the global markets, whether it’s expanding US companies, strong property markets, growth in India and Latin America, better fixed income rates etc. It’s about investing in higher and more global growth.
- Inflation is still 22% vs 4% in USD. 22% is one of the highest inflation levels on record, which means your Naira is losing value rapidly and way faster than dollars.
- Oil production is still significantly less than 2M barrels per day, so CBN’s ability to supply dollars into the market is still very limited.
- Nigerian imports are still consistently higher than exports.
- Foreign portfolio investments (FPIs) are still incredibly low, although we believe they will start to increase in the coming quarters as the FX regime is further liberalised and given the cheap nature of Nigerian stocks.
This is the time to continue to explore the diverse investment opportunities available to you on Rise, enjoy stable returns and continue to build long-term wealth.
Rest assured that Rise is monitoring the investment landscape and will always ensure to push your investments toward the right direction for your long-term growth. Continue to focus on the long term and avoid making snap decisions due to speculative reactions to the policy.
As always, if you have any questions you can send us an in app message or email or call us on 09122964215, 08187147405.
Love and returns,
The Rise Team.