Panic sets in, panic buying and observation of the dollar’s rate, Nigeria is now a dollar buying nation. Individuals making tough decisions Plan A or B. Plan A robbing Peter to pay Paul, buying as much dollar as you can to hedge against naira. That’s plan A for any smart person, it feels ideal, buy dollars, give it some time and Boom ! You hit the jackpot , the quest to become a millionaire has never been so simple, you go to bed thinking, wow I got a deal of a lifetime. Probably thinking of going harder with the gamble for dollars, the downfall of the giant, the giant begins to shrink in size, “ what has Nigeria ever done for me” you tell yourself so you can sleep peacefully, a giant becoming a dwarf being resized by its own people. Is this really the smart choice ? How did we get here in the first place? If this is a smart choice why are we the only country doing this ? Are we the smartest ? Why are developed countries not making this smart choice ?.
Hate to burst your bubble but that’s not a smart choice, Let’s discreet your trade. Dollar today is going for 1450 per dollar you buy your basic needs within a certain price range, it’s suitable and convenient for you, you go to bed, wake up to a new set of prices that you can’t keep up, you earn a million and spend half from the quarter you previous purchase from , you are not the only smart person the law of demand and supply is universal, inflation is delighted to join the course, we are buying basic needs for twice the price and lesser quantity, we are in danger, your dollar can’t save you, it’s not a fair trade, everyone struggling to keep up, this is our new reality.
Developers are not interested in selling if it doesn’t serve as a replacement cost, if the terms are not in alignment to the needs or desires of the seller, they are not interested. Sellers are protecting their valued assets and houses are being pulled out of the market, no use selling an asset if you cannot replace it. Everyone is in survival mode protecting and managing what they have. Buyers are not left out of the panic as every deal is a good deal, any assets are good assets. It’s a hassle getting a good deal in the market, even if you do the terms may not be in your favor. What’s the way forward, what’s the solution, what’s the wise choice, Hedging.
THE SOLUTION.
The solution is “ Hedging”, what is hedging ? Investopedia explains Hedging is a strategy that tries to limit risks in financial assets. It uses financial instruments or market strategies to offset the risk of any adverse price movements.
The best way to understand hedging is to think of it as a form of insurance. When people decide to hedge, they are insuring themselves against a negative event’s impact on their finances, Ibbotson and Siegael (1995) conclude that real estate compensates the investor for inflation risk. When real estate is added to a mixed-asset portfolio, the inflation risk of the expanded portfolio is substantially below that of the original portfolio. Assets that have the ability to protect investors from the effects of inflation are generally labelled inflation hedges. Real estate has been regarded as one of the best inflation hedges of past years.
Using real estate to hedge against the dollar while protecting the country’s asset, our asset is our currency, just as assets are tied down and protected we need to tie down and protect our currency. The best way to understand hedging is to think of it as a form of insurance. When people decide to hedge, they are insuring themselves against a negative event’s impact on their finances. This doesn’t prevent all negative events from happening. However, if a negative event does happen and you’re properly hedged, the impact of the event is reduced. Plan A will never protect our currency but give more power to the other, buying and saving in dollars is killing the economy, after buying dollars what next ? Naira is the legal tender for trading in Nigeria, no one is mandated to accept foreign currency in trading, Hoarding dollars will only reduce the circulation of dollars and create scarcity, so in reality we are recycling dollars to the highest bidder, how did we get here ?. Imagine Nigeria becoming heavily independent on dollars, we don’t produce dollars and never will, we barely have enough dollars to go around, market prices will go off the roof, housing situations will become unbearable as they will be charged in dollars to protect assets, buying dollars for ridiculous prices and all our goods and services will be dependent on another country, slowly but surely we are selling our country ethical and politely by our own doing.
Author– Amadi Gift
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