WHY DO EXCHANGE RATES MATTER? HOW DOES THE DOLLAR CONCERN THE PEPPER SELLER?

Inda-John Elizabeth

I know an old woman of about 78years old; this woman has an issue with our generation like most people her age do. ‘Grandma’ as I call her is a retired medical doctor; you sincerely cannot speak with Grandma for 10 minutes without learning something new. What is this woman’s fight with us? She claims we do not know anything. I used to think she was extreme, I mean, who doesn’t like to be respected? But now I see the truth in what she says.

The first time I met Grandma, she asked me what I knew apart from schooling, I mentioned my business, press, and side hustle and she concluded that I knew nothing. I was pissed but you never tell or show an old woman that you’re not happy with them. You nod your head and go to rant to your friend as I did. The next time she saw me, she asked me what I would do if my child woke up in the middle of the night, coughing and I felt “is this woman whining to me? I’m not even in a relationship!” But Grandma is right. You should know about a lot of things that are not ‘important’ to you.

Since I was in Primary school, I would hear Mom say to Dad, “Dollar has gone up so that’s why I couldn’t buy much in the market” I use to think oh that’s accurate because The Americans colonized us so their currency mattered to us. Then I got to Secondary School, studied Government, and saw that it was England that colonized Nigeria, so I was confused. Why should American currency disturb Nigeria? What’s our concern with them? Why does the dollar rate influence Mama Titi’s pepper in the market, especially when the pepper is from Mama Titi’s farm? Why is this norm? And so many other questions that I always had but never sought answers till now. The fact that we never find the answer to these questions is why Grandma calls us lazy.

What do exchange rates mean in the first place? According to the Corporate Finance Institute, “Exchange rates are the rate at which one currency can be exchanged for another between nations or economic zones. It is used to determine the value of various currencies concerning each other and is important in determining trade and capital flow dynamics.” In simpler terms, exchange rates are the value of a country’s money against another country’s currency.
Why does this matter to us? I’ll give you two reasons that you can easily identify with (You can thank me later though; I mean what are friends for?).

First of all, Government debt. If you know nothing about the economy of Nigeria, you are at least aware that Nigeria is deep in debt, as deep as shoulders. We owe approximately N60 trillion and hundreds of millions of dollars. Even if you say, it is the government that brought about the issue, you are a Nigerian and if Nigeria is in debt, you are too. Apart from the fact that you’ve been roped into a debt that you never saw or handled. The more the exchange rates go up, the more it’s going to be difficult for the country to pay up. See for example, if Laide borrows $10 from Teju when a dollar is N20. If a dollar becomes N50 tomorrow, I will have to pay almost double what I borrowed.

Secondly, inflation. A strong domestic currency makes importation cheaper. How? If the department of Classics (currency= Naira) was to import anything from the Department of CLA (currency= Dollar), and the exchange rate was 1naira to 1 dollar, we know for a fact, Mama Titi (PRO for Classics), would buy more pepper. However, the more the exchange rates increase, the less Mama Titi can buy. This then leads to inflation and goods in the domestic land become costly to get. How? Importation of goods like groceries becomes unnecessarily high; cost of living becomes high as well, resulting in inflation.

It is expedient for any wise youth to learn the dangerous habit of asking questions. No one would kill you if you type whatever you don’t get on Google. We must learn the art of learning for the day we cease learning, we stop growing.