What are you doing about your Business Foreign Exchange Needs?

Is your business dependant on the dollar? Do you do business in Nigeria but have to rely on the dollar?

Your business would be impacted. This is a fact. As at today, the Naira is N380 to $1 at the CBN rate and N480 to $1 as the more active black market. This is projected to get to N500. How badly this impact? We don’t know yet, but this is what we know and should be doing.

What we should know;

Nigeria is foreign currency dependant on many things from commodities to even essential services such as education, health and luxury.

The dollar has become a store of value for corrupt wealth. These monies are in the billions and unavailable to me and you.

The CBN is unable to provide all our foreign currency needs. Even when they can, they would not. Three factors would necessitate this. (i). They would be busy defending the naira. (II). Where there are not defending the naira, they would be providing foreign currency for Politicians and the worst reason is (iii). They would be on the round-tripping saga too.  (the reason why the parallel market is N380 and the BDC rate is N480) They always had, they always will.

 

Therefore, what should you be doing;

i.                Take time to assess your Foreign Exchange (FX) needs in 2021. My recommendation is to ask your accountant to quickly give you a snapshot of what your requirements have been in 2020. You can easily project.

ii.               You can consider prizing your products in foreign currency. It is against the law to sell products in Nigeria in a currency other than the Nigerian currency. However, talking to your accountant would reveal the workaround for you. A product sold in Dollars, for instance, would have no fear loss due to currency devaluation.

iii.              Do a prize readjustment and advise your clients quickly. You might also need to reprice your products and or your services and this, and you may need to inform your client.

iv.             You may need to stop providing some services. A strategic session of a product portfolio analysis would help you know what each product contributes to the entire sum. Please be mindful that there are product stages, and the fact that a product makes a loss is not the only consideration. Ask your accountant to help you with a “Contribution per product analysis.”

It would be a tough 2021 considering the recession. You might strongly consider a divestment strategy. Creating a synergy to help meet your FX needs would certainly not be a bad idea. With the right business support, you should not need to worry, however.

Take time to make a retreat before you go for the holidays. It would assist with the right perspective by the time you come back from the Holidays.

 

Philip Beida Consults for Liprima Consults. A bookkeeping Company.

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