My I-fone 7 Story

These days, some things can make you stand out as a 'correct guy' or leave you in the rank of "that guy is just there". It's generally the desire of any young, upcoming man to belong to the cadre of the 'correct guys'. I am no exception. When your friends hail you as a "Big boy" it doesn't matter if all you have in your wallet is just N50, you shake your head and tell them to stop like you're humble or you could just smile and say "baba, me that I'm loyal to your government, I'm just your boy". But everyone wants to be a "Big boy". I am no exception. When the i-fone 7 was released late last year, a friend bought his for a Hundred and Forty-five Thousand Naira (N145,000). I knew the money was much, I mean, I could rent a flat in Mowe with that amount (lol), but who doesn't want to be a big boy? I was so excited by the upgrade in class associated with owning the phone that I decided to reduce my eating at fast food restaurants and just buy a carton of noodles. Do you know how many varieties of Noodles you can make if you put your mind to it? In that time, I experimented with barbecue noodles and sliced onions, noodles and blanket egg, Palm oil noodles garnished with crayfish etc. After cutting expenses for two weeks, and raising the required amount, I was disheartened to discover that the price of the phone had increased by N10,000 (N155,000). I was still not deterred, and returned a week later with a Hundred and Fifty-five Thousand Naira (N155,000), and found out that the price had risen to One Hundred and Sixty-six Thousand Naira (N166,000), just few thousand bucks short of my monthly take home pay. Brothers and sisters, I decided to hold on and think about my life. The seller reminded me that the Naira had fallen (depreciated) from what it was the previous week. He advised me further to buy the phone instantly as he could not assure me of the same price if I chose to postpone purchase. In this state of 'higi-haga', I spoke with an Economist friend of mine seeking to understand what exactly was happening to the Naira. He gave me two key reasons for the falling value of the Naira: Declining price of oil in the international market Uncertainty in the economy due to upcoming elections With respect to the first point, the Nigerian economy is largely dependent on oil, as over 70% of government earnings (income) are derived from oil. A fall in the price of oil means the income (usually received in US Dollars after sales of oil in the international market) of the country will also reduce and thus, the volume of US Dollar in circulation reduces as well. The second reason was a bit confusing to me as I was wondering how elections would affect the value of the Naira. My Economist friend explained that elections typically bring about uncertainty concerning the would-be new government. As such, investors generally slow down or postpone investment decisions till after the elections. Of the two major points highlighted above, the 'election' effect has been more impactful (in a negative way) on the value of the Naira. This is the reason the value of the Naira depreciated to a high of N205/US Dollar at the inter-bank market when the elections were postponed. The question now is "How will the prices of goods & services be stable so that we can collectively save, plan, and buy whatever we like (the i-fone 7 in my case) irrespective of the price of crude-oil or elections date. Well, my Economist friend came up with a brilliant idea that might help to keep prices stable for importers/businessmen and us, the end users. He called this a "Forward" contract. A "Forward" contract is an agreement between two parties/individuals to buy or sell a particular currency at a specified future date and price. The agreed future price may be the current price of the currency, or possible future value of the currency. In other words, you "lock-down" the exchange rate for a particular currency over an agreed period of time. Thus, irrespective of what happened to the value of either currency, you will still buy your goods at the predetermined agreed exchange rate. You still confused? Okay, let's say the importer of the i-fone 7 I wanted to buy had entered into a "Forward" contract in November, he would have agreed to buy the US-Dollar at about N185/US Dollar for the period of importing the phones into the country. So in December or January, when the exchange rate had depreciated to about N195/US Dollar, it won't have affected his cost of importation as his Dollar cost would have remained at N185/US Dollar. If this had happened, possibly the price of i-fone 7 would have been stable and possibly, I would have also been a proud owner of one. Since it was not the case, guess who has to manage this rickety phone? In essence, this write up serves to advise you; if your income level is the same, you should consider stream lining your expenses, seek cheaper or local alternatives to the things you desire and just ensure you're financially prudent in this trying times. Interested in knowing more on how you could buy a "Forward" contract or manage your finances? Please talk to your One Customer Bank. - Aspiring Big Boy Courtesy Sterling Bank