Salary reduction: How you can benefit from a weak naira

Salary reduction: How you can benefit from a weak naira

Anyone involved in managing salary packages will know that exchange rates is essential in calculating take home pay.

What this really means is that currency movements can have a big impact on the value, or perceived value, of salaries.

Presently, naira’s value is plunging and it is doing so at an alarming rate.

A cost of living allowance calculated six months ago, for example, may no longer be enough to protect an employee’s purchasing power today.

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The Nigerian naira continued its downward slump on the parallel foreign exchange market yesterday as it traded for N450 to one dollar.

Analysts say the plunge is due to increased demand which is currently outweighed by its supply.

“The situation is gradually getting out of control. For me, you can’t give what you don’t have.

“Nigeria’s dollar receipts has dropped significantly and the CBN does not manufacture dollar, it earns dollar.

“And our dollar receipts have reduced significantly. So, we are in a dilemma.

“Another factor responsible for what is happening on the parallel market is that a lot of importers involved in the importation of those 41 items that were banned are also sourcing for FX to import those items for the normal end of year sales,” an analyst who pleaded anonymous said.

The source however said once the CBN finalize its arrangement for Travelex to be selling dollars directly to bureau de change operators (BDCs), normalcy might be restored in the market.

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In a nut shell, some importers have gone back to importing goods which the FG has banned.

To do this, they have to mop up the available dollars remaining in the market.

They’ll then use this dollar to buy goods which they know Nigerians will always buy in the coming festive seasons.

Because of this, dollars will become scarce, prices of imported goods will skyrocket and what your salary could purchase now may be insufficient to purchase tomorrow.

The trend will reverse, hopefully, by January of next year. But then, it will be smart to buy things you’d need now and stock them against the festive period.