Every currency around the world loses value every year. In fact, the currency is designed to lose value over time. That is why some financial scholars believe that currency as we know it is not real money because it lacks a major quality of money; a means of value preservation. In other words, like Gold and wine, the value of money should appreciate and not depreciate with time.
However, some currencies lose their value faster than others. On one hand, we have hard currencies like the US dollar, Japanese Yen, and Pounds backed by strong economic and political stability. On the other hand, we have weak currencies suffering from high fluctuation and inflation due to economic and political instability.
If you live in most parts of Africa, you probably live under the negative influence of unstable currency highly susceptible to inflation. Let me give you some examples of how a weak currency affects you as an individual.
Let’s assume you live in Nigeria and were earning 10,000 nairas this time last year. Using the parallel market rate, that is equivalent to $28. Due to the economic lockdown and poor economic and political management, your 10,000 naira is now worth $20.
Your purchasing power has declined significantly. You can no longer afford a $28 lifestyle. Assuming you have managed to save 100,000 naira in the bank over two years, instead of $280, your savings are now $200 without you lifting a finger.
But it’s even worse than that. As of September 2020, the inflation rate in Nigeria was at 13.71 percent. If your 100,000 in the bank didn’t earn you interest, you have automatically lost over 13 percent of your money. So your 100,000 naira has become as valuable as 86,300 naira.
Run this figure over a period of 10 years, and you’ll see how economically disadvantaged you are if you rely on income and saving within your local economy. But it doesn’t have to stay this way. There is something you can do about it. In fact, you can use the weak currency to your advantage, and I’m going to show you how in this video.
You see, for the past 10 years of doing business, I have not relied on my local economy. My business earns over 90 percent of its revenue in dollars. As much as I would want my country’s currency to hold value much longer, my business is not at the mercy of a failing currency. My business profits whether the currency gets strong or weak. Here are the simple steps of how I do it.
Earn in hard currency
This is the hardest part of the three steps; but the most rewarding. However, earning in hard currency is not as hard as you think. Today, the world is a global market place; anyone can sell their skill, product or service across the world and earn income in US dollars or any other hard currency.
A simple way to start is learning a tech skill and offering freelance service at online marketplaces. You will get paid in dollars. Register a domiciliary account and receive your income in dollars. You can also start an online business like blogging, Vlogging, and affiliate marketing and get paid into your domiciliary account in dollars. You can even be diversifying your income by earning dollars from multiple avenues.
What it takes is to build an online platform that is useful to a large number of people across the world. That is the hard part. Once you succeed in building such a platform, earning in dollars is the easy part. You can earn money from selling your own product, selling other people’s products as an affiliate, or selling advertising space.
Everyone may not be able to earn in hard currency. Fortunately, there are other options.
Save in hard currency
If you have basic economic knowledge, you didn’t need an expert to tell you at the early stage of the lockdown that the economy is going to be hit, and as a result, there will be currency devaluation. It was obvious. What smart people did at that time was to convert their local currency to hard currency. That way, they preserve the value of their money.
For example, from March to November 2020, the naira has been devalued by up to 36 percent. If you saved in dollars, you would have preserved 36 percent of your wealth. Even if you have saved in dollar with zero interest, you would still be better than someone that earned 20 percent interest from naira during this period.
To be clear, the COVID-19 event was a black swan. Things like this happen once in a decade. But regardless, an unstable economy will continue to be subject to currency devaluation and high inflation. For example, within the past 5 years, the naira has been devaluated by 150% to the dollar. This makes saving in weak currency a high risk venture. If you want to beat inflation and currency devaluation, you should consider saving in hard currency. By saving in dollars, you are already in a better position even without earning interest. But it doesn’t have to end with savings alone.
Invest in hard currency
This is where you play checkmate against the weak currency. You don’t only preserve the value of your money, you grow it simultaneously.
Some dollar investment options have ridiculous interest rates, especially from established financial institutions. The first dollar investment I did with a bank was at 3.5 percent per annum. It wasn’t impressive, but it was definitely better than keeping the money in my domiciliary account without interest.
A lot of startups are springing up today offering foreign investment opportunities in the stock market, real estate, and Euro bonds. I’m not going to mention names in this video. You have to do your research and pick the one that resonates with you. But be careful when choosing an investment platform. Euro bond investment has lower risk and lower return. Real estate investment has mid risk and mid return. The stock investment comes with high risk, but it can be more rewarding with the right hands.
With investment apps, you can invest in dollars and monitor your investment from your mobile phone.
Earning, saving, or investing in hard currency is not as hard as you think. I’ve been doing all three for the past 10 years now. To earn in dollars, you have to sell your service or create a product in the international market. To save in dollars, you have to receive your earnings in a domiciliary account or change part of your local income into dollar at the right timing. To invest in dollars, you have to explore the different investment options available. They are typically stock market, real estate and Euro bond fixed income. But be sure to do your due diligence when choosing an investment partner.
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