Thread by @TokunboAdesina

How to prepare for #naira devaluation and what it means for 🇳🇬

The devaluation of the naira is the process of lowering the official value against the 🇺🇸 dollar or other foreign currencies

The effect of the devaluation of the naira can have both positive and negative impacts on the Nigerian economy and society.

Some possible effects are: Devaluation can make Nigerian exports cheaper and more competitive in the global market, which can boost export earnings, FX holdings, and economic growth

Devaluation will likely make imports more expensive, which can reduce import demand, improve the trade balance and encourage domestic production and consumption of local goods and service

However, devaluation can also increase the cost of servicing external debt, which is denominated in foreign currency

Nigeria's total debt is more than $103 billion Devaluation can also fuel inflation, as imported goods and services become more costly, and domestic producers may raise their prices to reflect higher input costs

Devaluation can also affect the purchasing power and welfare of Nigerians, especially those who rely on imported goods and services or remittances from abroad

It can have a negative impact on those who have assets or income in the devalued currency, as they lose purchasing power and wealth relative to other currencies

So, possible ways to prevent devaluation are: Diversify your portfolio into foreign assets or currencies that are likely to appreciate or stabilize against currency depreciation

This helps hedge currency risk and maintain purchasing power around the world

Hedge with commodities or commodity-related assets such as gold, oil, metals, and agricultural commodities that tend to appreciate in value when currencies depreciate.

This is because in the global market goods are valued in 🇺🇸 dollars and depreciation makes the goods more expensive for domestic consumers.

Reduce your exposure to foreign currency-denominated debt as the cost of repaying the debt is higher due to the devaluation of the foreign currency.

Alternatively, debt risk can be hedged using derivatives such as futures and options that lock in or take advantage of favorable exchange rates

Increase your savings and income in a depreciating currency, as a depreciating currency reduces your real income.

Consumption is enabled by demanding higher wages, increasing productivity, and finding alternative sources of income.