How will moving to a single exchange rate impact those who send money to Nigeria?
If you transfer money to Nigeria on a regular basis there’s plenty to consider to ensure you’re doing so in the most efficient, cost-effective way. One of the most important considerations is the exchange rate, or the amount for which one currency is exchanged for another.
Most countries have a fluctuating exchange rate. Exchange rates never stand still, they change on a minute-by-minute basis in response to a whole range of external factors, such as a country’s balance of trade and inflation.
Clearly those of you sending money home will be impacted by this change, as the exchange rate on any given day can have a very real effect on the amount of money our loved ones receive. For this reason it’s important to keep track of them.
Do you send money to Nigeria?
Nigeria has recently chosen to adopt a fixed exchange rate instead of a fluctuating one. This means, all money exchanges will happen at a rate that doesn’t change.
So, what is the new exchange rate? How will it affect your transfers? And what might this mean for Nigeria? Let’s find out.
How has the exchange rate changed?
The Central Bank of Nigeria (CBN), based in Abuja has lowered the official exchange rate on its website by 15%, from 307 Naira per dollar, to 360 Naira per dollar. Other rates — such as the GBP rate — will be derived from the US dollar cross rate on the date of sale of the dollar.
How will this impact your money transfers?
For those sending money to Nigeria, especially if you do so on a regular basis, this is good news for a number of reasons
1. You get more Naira for your money
At the most recent exchange rate of 307 Naira to one dollar, sending $100 to Nigeria would have given your beneficiary 30700 Naira. At the current — fixed — rate of 360 Naira to one dollar, $100 dollars will get you 36000 Naira.
2. You can transfer dollars regularly without worrying about the exchange rate
Fluctuating exchange rates can lead to uncertainty around when the best time to make a transfer is. If the rate goes up, it is more expensive to send money, so it can be tempting to wait a few days to see if it goes down again. The problem is, that is not a guarantee. A few days later, the rate might be even worse. With a fixed exchange rate, you can send dollars as regularly as you like, without having to worry about how the exchange rate will affect your transfer.
3. The amount of dollars you send can be predicted
Regardless of whether an exchange rate is up or down, one of the challenges of international money transfer is not knowing precisely how much money will be received at the other end. With a fixed exchange rate, regular payments in dollars will be consistent and predictable and allow for some otherwise impossible financial stability on both sides of the transaction. You can be confident that your regular payment will maintain its value.
4. Transfers from other currencies will still fluctuate
However, transfers made in currencies other than dollars will still be reliant on a fluctuating exchange rate to the dollar. So, while sending dollars to Nigeria will indeed be far more stable, if you are relying on other currencies, the effects of the exchange rate will still be a factor to consider.
What does this mean for Nigeria?
“A weaker official rate will give a big boost to the revenues of the federal government and states by allowing dollar earnings from oil to be converted to Naira at a higher rate.”
African Review, goes further, saying a fixed exchange rate, "is going to assuage the fears of portfolio investors, reduce rent-seeking in the foreign exchange market, serve a deterrent to currency hoarding and mitigate revenue shortfalls for the economy”.
The most popular ways to send money to Nigeria:
- Cash pick up
- Bank deposit
- Anywhere pick up