Author Archives: Bash B


Budget for Love

It is Valentine’s Day on Sunday!¬† ‘Tis the season of love ūüôā .¬† In 2015, US$18.9 billion (yes, with a “B”) was spent on Valentine’s Day related gifts and activities in the United States of America.¬† I do not have the stats for Nigeria or the rest of the world, but I can imagine the numbers are just as mind-boggling.¬† So, we can safely conclude that love can get very expensive!

I will not go into the technicalities of what makes an appropriate Valentine’s Day gesture and what is not, how much should be spent, or whether to celebrate at all.¬† What I WILL state is that: “Don’t let love break the bank!”¬† Wondering what I mean?¬† Let’s take a walk with Gbenga.

Gbenga is a 25-year-old man who is a junior analyst at a bank.¬† He has finally gotten Yemisi, a 23-year-old intern, to agree to be his girlfriend.¬† It is 5 days to Valentine’s Day, and he is thinking of what to do to wow her on that day.¬† He has come up with the following¬†plan to impress his girl:

  1. Buy her a really nice piece of jewellery (cost: N25,000)
  2. Take her out to dinner at a fancy restaurant (cost: N20,000)
  3. Take her to see a movie she’s been wanting to see and grab a snack while at it (N5,000)

Total bill: N50,000

N50,000 may be a drop in the ocean for some, but not so for Gbenga.  His monthly take-home salary is N100,000 per month and his regular monthly expenses are as follows:

Description                                                                     Amount (N)

Rent (he shares an apartment with friends)                  35,000
Feeding & Transportation                                                 25,000
Tithe                                                                                      10,000
School Loan Repayment                                                    20,000
Contribution to Mama*                                                       5,000

Total                                                                                      95,000

As we can see, Gbenga has only N5,000 of “free” money left after he takes care of his needs and obligations – and he has not yet¬†put anything aside for savings ūüėź . ¬†His Valentine’s Day plan would surely break the bank!

We would not want Gbenga to get into financial trouble over love now would we?  So let us give him some precious advice.  Gbenga has two options:

  • Cut his coat according to his cloth: Gbenga’s true discretionary income this month is N5,000, so he can stick to the item on the plan that fits within his budget, i.e. take Yemisi to see a movie she’s been wanting to see and grab a snack while at it. ¬†This way, he is spending within his means, having fun while at it, and not taking on useless debt.
  • Save his money: This is even better; who says one has to spend money to have fun? ¬†Gbenga has a television in his room with a basic cable subscription. ¬†He can invite Yemisi and another of their couple friends over to a potluck dinner and in-house movie viewing :-). ¬†The benefits of this option are: (1) Gbenga and Yemisi get some quality get-to-know-each-other-better time between themselves, as well as with the other couple; (2) Gbenga gets to add to his savings; and (3) Gbenga has enough food (food never finishes at a potluck, he he) for the next few days, meaning he can save some of the amount he has budgeted for food.

If you were Gbenga, or Gbenga’s big sister, which option would you pick?

Happy Valentine’s Day in advance dear readers! And remember that true love has no price.


* featured image courtesy


[Guest Post] The Importance of Financial Knowledge and Financial Planning ‚Äď An Economic Migrant‚Äôs Perspective

This current article about being an immigrant is about what economic migrants aim to achieve by migrating and why we sometimes fail at this goal. I have chosen to refine my definition to economic migrants given the current debate about refugees and other types of immigrants.

Economic migrants are individuals who leave their country or region of birth primarily for the purpose of economic advancement for themselves and their families.

During a recent discussion with other economic migrants, as is usually the case with these meetings, the conversation drifted to the topic of returning ‚Äúhome.‚ÄĚ As the people around me discussed the merits and demerits of returning home, I thought about the practicalities of returning home. Were many of us to return home, we wouldn‚Äôt be significantly financially better off than we were when we left. Given this, could we say we had achieved our goals as economic migrants? Probably not, if compared to peers that didn‚Äôt migrate.

After confronting this stark reality, I started to think of reasons why economic migrants may fail at achieving their goal of economic advancement, particularly in the United Kingdom (UK). There are some factors which I think could be generic to most people, some factors unique to African migrants and some unique to immigrants to the UK.

One of the factors peculiar to African migrants is our general lack of awareness about debt. African societies are largely cash-based societies with limited access to credit. If you wanted to buy something you couldn‚Äôt afford, you saved for it rather than buying it on credit. Credit is considered a bad word. There was a popular sign in most Lagos corner shops that said: ‚ÄúNo credit today, come tomorrow.‚ÄĚ On arrival in the UK, many of us treated our credit cards like cash and we bought things we couldn’t afford incurring lots of interest charges along the way.

Another area in which this lack of debt awareness manifests is in the way we handle our mortgages. Many of us still don’t understand that a mortgage IS a debt facility, and the sooner you pay it off, the less interest you will pay overall. There are many differing opinions about this though, such as putting the potential over-payments in alternative investments with better yields.  [Finomics 101: alternative investments should only be embarked on after thorough discussions with your financial adviser, so the risks involved are properly understood.]

Another African migrant feature is ‚Äúkeeping up with the Joneses.‚ÄĚ In Nigeria, your success is usually measured relative to your peers. It usually never matters how well you are doing as a person if X is doing better than you. Everyone does it. From parents comparing siblings to colleagues comparing themselves to each other. This ends up creating a high level of insecurity in most individuals, forcing people to acquire items they do not need just to be considered to be well-off. So, a lot of migrants end up spending significant portions of their hard-earned money trying to ‚Äúkeep up with the Joneses‚ÄĚ in their church, in their extended family, etc. I acknowledge this is worse in Nigeria. Personally, I adopt the old saying ‚Äúcomparison is the thief of joy.‚ÄĚ

Yet another African-immigrant factor is our religious hopefulness. Most African migrants are very religious which makes us very hopeful and positive, but ill-prepares us for adversity. While I appreciate different religious beliefs, the fact is that there is no job security in the western economy and job losses can happen to anyone, and did happen to many during the 2008 recession. Given the cyclical nature of the western economies [Finomics 101: this applies to all economies], most of us should prepare for such uncertainties by saving and being conservative with our earnings, but this is hardly ever the case.

Lastly, a factor that is subject to debate, and from my personal experience¬†appears to be unique to African and maybe Asian societies, is the sense of communal ownership of personal property. Western cultures are very individualistic, meaning your fortunes and woes are largely attributed to you. This is generally not the case in Africa: the idea is that if you are materially successful, the fortune is to be shared with the community and if you are in financial difficulty, the community will bail you out. As my mother usually says, ‚Äúajoje lo ma n dun‚ÄĚ meaning you shouldn‚Äôt enjoy your good fortune alone. Another local parlance is ‚Äúchop alone, die alone.‚ÄĚ ¬†What this attitude creates is a sense of entitlement and a something-for-nothing culture. People back home feel entitled to ask migrants for financial support and should the migrants refuse, they are seen as reneging on this societal contract. The reason I say this is subjective is that it is up to an individual to decide which requests they fulfil, and which ones they ignore, but the societal contracts make it okay for people to keep asking without offering anything back in return.

Moving on to the factors peculiar to the UK, career progression is harder in the western economies because they are inherently more competitive.  There are more people, both indigenes and migrants, competing for the few positions at the top; as a result, there are many factors that can be used to discriminate against individuals including race, gender and class, which is why successful African migrants such as Tidjane Thiam are a rarity in the UK.

Another factor unique to the UK is the possibility of getting complacent. Thankfully, in the UK, we don’t pay at the point of use for healthcare, education and social amenities like security. However, this means that even if you are out of a job in the UK, you can solve your healthcare problems and send your kids to school. This contrasts sharply to Nigeria where you have to fund these yourself at the point of use, and you really can’t afford to be broke as you or your kids may die as a result. I am not saying this is ideal, but it creates an element of drive which most individuals living in the UK don’t have.

Another UK factor is the cost of living. The cost of living in the UK is significantly higher than the cost of living in Nigeria and even the United States of America (US). These include the higher taxes (to offset the free healthcare, education and security) and the high cost of necessary infrastructure such as energy (including heating in the winter), water and transportation which are provided by private companies trying to generate a profit.

The last factor, which can totally be avoided, is Consumerism. Many African migrants came from an environment of poverty and were suddenly thrust into this world where you could have it all for a price. We mostly forgot our humble beginnings and we consumed it all, spending most of our earnings along the way. We adopted the Western mantra of living in the moment and letting the future take care of itself. We didn’t think of how to preserve our wealth for our retirement and the future generations.

I would like to end by saying there is still hope for us and for our children to achieve the goal of economic advancement, but we need to expand our financial knowledge and become more self-disciplined about our economic goals.


The author, Mrs Fad, is a wife, mum, and economic migrant who departed her home in Nigeria for the United Kingdom 10 years ago.


* featured image courtesy



Money Basics: “Better Late Than Never”

So, this week’s post is late ūüėģ ! My attempt at being superwoman this week didn’t quite come through ūüėź ; between some minor health issue and plain over-scheduling, I was not able to get the typical Finomics 101 post published for your reading pleasure. When I woke up this morning, my first thought was to let this week be my “off week”, everyone needs one of those every now and again, no? ūüôā It is already Friday — I will simply make up for it with a top-notch post early next week. ¬†And then the very well known saying popped up in my head: “better late than never!”

Of course! ¬†This is not a typical Finomics 101 post. ¬†It is late. ¬†But I am still writing, because every situation presents a lesson, and in the midst of this babble, there is one ūüôā : it is never too late to get off the wrong course and head in the right direction. ¬†How does this apply to personal finances you may ask? ¬†My take is that no matter how poorly or ignorantly one’s finances may have been managed in the past, every day presents a brand new opportunity to make the decision to begin the journey to financial sanity. ¬†It will require a lot of work and mental strength for sure, but we all know what they say about good things not coming easy. ¬†No matter how late you think it is, it is way better than delaying the turnaround and going further down the wrong way.

So, I am hoping this little blurb will provide you with the encouragement you need to seek the professional advice that would enable you get on the right path, regardless of how far down the “wrong” lane you think you may have gone. ¬†If you would like to start a conversation regarding getting your finances in order, you could either leave a message in the box below¬†or send an email to

In the meantime, have a lovely weekend!



Risk Management 101 (Part II of II)

Happy mid-week all ūüėÄ

Last week, we introduced Jummai and her self-assessed risk profile.  We shall now go through each of the risks she identified, and the ways she can go about managing them.  For each risk, we shall look at the following risk management strategies:
* preventive – to reduce the probability of the risk occurring, and
* curative – to reduce Jummai’s negative financial impact should the risk occur; these have to be implemented before the risk occurs though, otherwise it would be synonymous with campaigning after an election ūüėģ




image courtesy

This is the risk that Jummai will fall ill and (i) have to spend a lot of her salary on medical expenses; and (ii) not be able to earn her income as the illness may affect her ability to get her job done.

  • Preventive
  • Curative: purchase health insurance^ (also called medical insurance). ¬†Many employers already provide this as part of the employee benefits package. ¬†This is the case for Jummai. ¬†She, however, needs to obtain from her employer the details of what the insurance policy covers, and all relevant limits so that she understands the extent of her cover. ¬†If she thinks¬†the cover provided by the company health insurance policy is inadequate, she should consider:
    • obtaining additional health insurance coverage, either through her employer’s policy or by buying a separate policy on her own. ¬†Jummai should note that this will require her to be responsible for any additional payments to the insurance company.
    • establishing and maintaining a special savings account for the purpose of funding health-related expenses not covered by the insurance policy(ies).



This is the risk that Jummai’s tear-rubber¬†car may be involved in an accident that may, at best, result in damage to her car, another person’s car, or property. ¬†It could also result in bodily injury to herself or other people.

  • Preventive
    • go for defensive driving classes (if you have ever driven in Lagos, Nigeria or New York City, USA, you will understand ūüėÄ )
    • ensure the car goes for regular maintenance checks and procedures
    • proactively check her tyres and various car fluid levels before setting out every¬†day
  • Curative
    • use her seat belt every time, and encourage all occupants of her car to do the same
    • purchase comprehensive car insurance^ (also called auto insurance)



This is the risk that Jummai’s car or residence may catch fire, destroying assets, some of which may be difficult to replace, and some which may be outright irreplaceable.

  • Preventive
    • turn off the cooking gas supply whenever she is not cooking
    • take other necessary precautionary measures while cooking
    • be very cautious whenever there is a naked flame in or around the house
    • take necessary precautions when handling fuels, gases, and any petroleum products, e.g. do not have a naked flame nearby or use an electronic communication equipment such as a cellular phone while filling a car/generator tank with petrol/gasoline
  • Curative
    • install smoke alarms and water sprinklers in the house
    • always have functioning fire extinguishers in strategic locations
    • have a fire blanket, escape stairs, and other fire protection devices handy
    • purchase home insurance^ (also called home property insurance) and auto insurance^




image courtesy

This is the risk that burglars may break into Jummai’s home or car and dispossess her of her belongings.

  • Preventive
    • choice of neighbourhood: we all know some neighbourhoods are more crime-prone than others
    • install¬†security deterrents: e.g. security doors, burglary proof bars, electric fences, burglary alarms, car alarms.
    • be security conscious
  • Curative: purchase home insurance^ and auto insurance^


Education of dependent


image courtesy

This is the risk that Jummai may lose her ability to earn an income to continue funding Halima’s education, either due to a long-term illness, disability, or death.

  • Preventive:¬†the preventive measures under “Health” above would apply
  • Curative
    • purchase disability insurance ^
    • purchase life insurance^
    • establish an education trust^


Job loss

This is the risk that Jummai may have her employment unexpectedly terminated by her employer and not be able to immediately secure another source of income.

  • Preventive: Jummai needs to be an asset to her employer by being an exceptional problem-solver that they cannot do without :).
  • Curative: setup a 6- to 12-month emergency fund


Investment loss

This is the risk that Jummai may lose some or all the money she has invested due to a general economic downturn, or a reversal in the fortunes of the entity(ies) she invests in.

  • Preventive: Even though it is impossible for anyone to prevent a general economic downturn (economic cycles are a fact of life), Jummai could optimise her investments by¬†engaging the services of a financial planner (like yours truly ūüėÄ ), who would advise her on the best strategies to diversify her investment risk.
  • Curative: ¬†Making a financial investment is making a conscious decision to take on risk. ¬†Consequently, it is impossible for Jummai to insure herself against losing her investment should that risk materialise. ¬†However, by implementing the prevention strategy above, Jummai can reduce the loss(es) she does incur.


^ Always consult with a financial adviser so as to properly understand the terms and conditions of any insurance or financial product.


Do you have any additional preventive and / or curative risk management strategies to recommend for Jummai?  Any risk exposures that she missed during her assessment?  Or do you need assistance including risk management strategies in your financial plan?  You could send an email to, or leave a message in the comments box below.

Risk Management (Part I of II): “I should get insurance? Why?”

… because it is a really smart thing to do :).

It is the first week of the year, and a lot of us have new year resolutions and “never again” predictions.  Happy new year by the way :D.  The new year usually brings along with it a heightened sense of hope and “can-doism.”  But how many of us think about how to protect ourselves from the things that can go wrong?   Have we included insurance in our financial plan?

This week we start the two-part introductory series on risk management; insurance is one of the most popular tools used for risk management.  “Big grammar” you say?  Ok, I will start from the top.

What is Risk?

In the simplest terms, risk refers to the possibility, no matter how tiny, that an undesirable event will occur. For example, the possibility that one’s car will be scratched by a danfo is a risk drivers in Lagos face every day.  Other risks we continuously face include:

So, life is full of risks – once we are born, we face numerous risks every day, whether we realize them or not; nothing new or special there.  Some risks are significant, i.e. have a very high probability of occurrence – how many cars in Lagos have been spared “the scratch”?  You get the drift :).  While others are not, e.g. the risk of a meteorite falling on your house.

What is Risk Management?

Now that we know that risk abounds everywhere, just like air, we can talk about managing it, as the option of avoidance does not exist.  Some people try to make themselves believe they are avoiding risk by claiming “it is not my portion,” but that is about as effective as an ostrich burying its head in the sand to escape from the trouble it sees ahead :).  Even if you sit in your house all day every single day, the risk still exists that a plane will fall on your house – minute, but a risk nonetheless.

So, risk management is the process of categorizing one’s risk exposures into various buckets ranging from “significant” to “barely”, and then checking around to determine if there is a way to minimise the possibility of the risk occurring, or finding someone else out there who can do a better job of bearing that risk in exchange for a nominal fee.

“What was that?!” you ask?  Here’s the breakdown:

Jummai resumed her first post-graduation job last year, and has been able to save enough money to buy her first car – brand new, cash down.  Yippee!  She has also been able to save enough to consider making a financial investment.

Jummai is the oldest of her 5 siblings, and has decided to assist her parents by taking on the financial responsibility of her youngest sister’s education; Halima is currently in elementary school, in Grade 5 (or Year 5, or Primary 5, depending on which nomenclature you are familiar with :)).

Her employer recently sent her on a training about personal risk management as part of her professional development curriculum, which she found extremely educational. She is now trying to apply what she has learnt.

The first step she is taking is to list the medium to significant risks she believes she is facing on a daily basis:

  • health: the risk that she will fall ill and (i) have to spend a lot of her salary on medical expenses; and (ii) not be able to earn her income as the illness may affect her ability to get her job done.
  • auto: her car may be involved in an accident that may, at best, result in damage to her car, another person’s car, or property.  It could also result in bodily injury to herself, or other people.
  • fire: her car or her residence may catch fire, destroying assets, some of which may be difficult to replace, and some which may be outright irreplaceable.
  • theft: burglars may break into her home or car and dispossess her of her belongings.
  • education of dependent: she may lose her ability to earn an income to continue to fund Halima’s education, either due to a long-term illness, a disability, or death.
  • job loss: she may have her employment unexpectedly terminated by her employer and not be able to immediately secure another source of income.
  • investment loss: she may lose some or all the money she has invested due to a general economic downturn, or a reversal in the fortunes of the entity(ies) she invests in.

In Part II, we shall look at each of these risks, and explore ways in which Jummai can either mitigate (i.e. reduce the possibility of the risk occurring) or manage (i.e. minimise her loss should the risk occur) them.

Are there any other risks you think Jummai is exposed to that she has not listed here?  Please share in the comments box below.



Much Ado About FX (Part III of III): Why Does It Matter?

If you are just joining the party, it will help to go through:

  1. What is an Exchange Rate?
  2. The Mechanics of the Nigerian FX Market

Now to the final part… ¬†Meet¬†the Wazobia family.

The Wazobias love the good things of life. ¬†They are very exuberant – work a bit and party hard; some say they work to party :)! ¬†They have a lot in their backyard, but they don’t produce much. ¬†They have a lot of land and seeds, but they do not produce enough food to eat; they prefer to buy food and groceries from their neighbors. ¬†They have a well of black gold, which they fetch from and sell to other families. ¬†A lot of essential commodities can be extracted from this black gold, including the fuel the Wazobias use to generate electricity and power their vehicles and machines. ¬†The Wazobias have not bothered to extract these by themselves; they find it more convenient to sell the black gold to their neighbors, and then buy these essential fuel commodities from their¬†neighbors when they need them. ¬†Every time the Wazobias produce something and sell to their neighbors (exports), they earn xZollers. ¬†Every time they buy something from their neighbors (imports), they spend xZollers. ¬†Doing business amongst themselves, they spend their local currency, the Waz.

This black gold was very expensive for most of the last decade. ¬†Consequently, the Wazobias had been swimming in xZollers. ¬†The Wazobias did not utilize these earnings to educate themselves or develop their capacity to: grow their own food, make their own tools, medically treat themselves, and produce their own fuel. ¬†Instead, the Wazobias bought even more items from their neighbors, including basic grocery items. ¬†Their neighbors loved them because of the amount of business they always brought. ¬†The exchange rate between the xZoller and the Waz remained stable because every time a Wazobia needed to obtain xZollers to make a purchase of goods and services from their neighbours, no matter how frivolous the purchase, the xZollers were made available from the Wazobias’ large (and seemingly never-emptying) store of xZollers.

About 18 months ago, the fortunes of the Wazobias changed – the price of their black gold dropped! ¬†It was not a small “don’t worry it is just a dip and will pick up soon” type of drop. ¬†It was an over 70% decline over about 12 months, with 50% of the decline occurring¬†in less than 6 months. ¬†Remember that the Wazobias earned the bulk of their xZollers from this black gold. ¬†As they had not invested in being able to be self-sufficient, i.e. produce things by themselves for themselves, the Wazobias found themselves in an unenviable position of having to still go to their neighbors to buy almost everything they need. ¬†Now they needed a lot more xZollers than they could earn as they did not have much else to sell to their neighbors other than black gold. ¬†As a result, it has become more expensive for the Wazobias to obtain xZollers as it has become rather scarce.

In order to conserve the few xZollers now available, the elders of the Wazobia family decided to impose restrictions on who could come and buy xZollers at a preset exchange rate (official market). ¬†They pre-set the exchange rate so as to minimize the cost-increase impact (inflation) on the Wazobia family. There were other members of the Wazobia family (the Cartel) who had their own stores of xZollers obtained from various sources – some legal, some illegal. ¬†The Cartel decided to capitalise on the scarcity¬†of xZollers to make a lucrative market of their own (parallel market). ¬†Some of the members of the Cartel were even able to access the official market; but instead of utilising the xZollers they obtained from there for the purpose they indicated, they placed them¬†for sale in the parallel market. ¬†As we all know, the scarcer an item is, the more expensive it will be; this is called the law of demand and supply. ¬†Due to the restrictions placed by the elders, more and more Wazobias trooped to the Cartel to obtain xZollers to enable them keep up with the taste for their neighbor’s goods and services that they had grown accustomed to. ¬†Not surprisingly, the parallel rate is now much higher than the official rate.

The Wazobias’ story is the story of Nigeria: ¬†the black gold is our crude oil, the Waz is our Nigerian Naira, and we are currently an import-dependent nation. ¬†The elders of the Wazobia family represent the CBN, and the neighbors are Nigeria’s trade partners.

If this series has served its purpose, then these news articles should be easy to digest :):


Were you able to make sense of the news articles?  Do you still have any questions about any aspect of the Nigerian FX market?  Got any recommendations on how the Wazobias can get out of this quagmire?  We look forward to reading from you: a comment in the box below or an email to

Happy new year all! “See” you in 2016 ūüôā


image courtesy


Much Ado About FX (Part II of III): Nigeria’s FX Market Mechanics

In the first part of this “Much Ado About FX” series, we got to¬†know what an exchange rate is, how it is derived, and some of the participants in the FX market. ¬†Now to the operational nitty gritty of how the FX markets in Nigeria work.

Anyone looking to buy or sell xZollers in Nigeria has three options to choose from:

  • The official market, aka Bureaux de Change (BDCs)
  • The parallel market, aka “Mallams”
  • The private market, aka¬†“Paddy”

The Official Market

Also called the Interbank Foreign Exchange Market (IFEM).  Due to the scale of its export-related activities, the FGN, through the CBN, is supposed to have the largest store of xZollers in the country (see Part I for background).  This makes the CBN the biggest seller of xZollers in the market.  The CBN, however, does not sell xZollers directly to end users (they used to, but they stopped in February 2015); they provide xZollers wholesale to BDCs, who in turn sell to the end users, making their profit by selling at a slightly higher rate than they received from the CBN.

A Bureau de Change (BDC) is essentially any business where people can exchange one currency for another.  BDCs are usually located at banks, travel agencies, and airports (source: Wikipedia).

The BDCs are heavily regulated by the CBN, which determines (among other things):

  • the amount of xZollers they can receive on any specific day
  • the applicable exchange rate(s) they can buy or sell xZollers
  • who they can buy xZollers from or sell xZollers to
  • the amount of xZollers they can maintain in their respective accounts

So, anyone who meets the CBN’s conditions can buy or sell xZollers in this official market.

The Parallel Market

Whenever there is a restriction to the access of a critical resource, a black market usually develops.  According to Investopedia, a black market is

Economic activity that takes place outside government-sanctioned channels. Black market transactions usually occur ‚Äúunder the table‚ÄĚ to let participants avoid government price controls or taxes …¬†In the financial context, the biggest black market exists for currencies in nations with strict currency controls.

Due to the strict controls placed by the CBN in the official market, a publicly accepted black market, commonly referred to as the Parallel Market, exists. ¬†The traders in this market are popularly called “Mallams,” which is a term used to refer to men from the northern part of Nigeria; ¬†historically most of them are from this region.

In addition to the absence of CBN controls in this market, some of the reasons the Parallel Market is patronised are:

  • there are more friendly hours; xZollers can be bought or sold at 10pm on a Wednesday or 7am on a Sunday
  • it aids anonymity; no form of identification is required, government-issued or otherwise
  • it is fast; a transaction can be completed in as little as 60 seconds with both parties happily on their separate ways afterwards

Historically there have been times when the “parallel rate” (the exchange rate in the Parallel Market) has been <5% higher than the “official rate” (the exchange rate in the Official Market). ¬†At times like this when the CBN restrictions are very tight, the parallel rate could be up to 150% higher than the official rate.

The Private Market

Simbi wants to go to Phuket, Thailand for a much-needed time away. ¬†She needs to buy some xZollers to take along for her room & board and other incidentals. ¬†Her cousin, Jide, recently received some xZollers as a birthday gift from his mum. ¬†Jide needs to exchange these xZollers for Nigerian Naira so he can go to the computer store and buy the laptop he has been wishing for. ¬†Simbi mentions to Jide her travel plans and her need for xZollers while on a visit. ¬†Jide very excitedly informs her that he has some xZollers he needs to exchange. ¬†Simbi cannot believe her luck, and they immediately agree on an exchange rate; Jide gives Simbi the xZollers, and Simbi transfers the agreed-upon amount of Nigerian Naira to Jide’s bank account.

This is the Private Market. ¬†The buyer and the seller know each other, privately agree on a rate, and transact their FX trade outside of the other two markets. ¬†The buyer is the seller’s “paddy” and vice versa. ¬†The volume of transactions that can take place here is negligible relative to the other two.

Hope this helps with your understanding of the mechanics of the Nigerian FX market. ¬†Next week, in Part III, we shall go into the “whys”:

  • why is the CBN taking the actions it is taking?
  • why are the banks taking the actions they are taking?
  • why is the parallel rate so far away from the official rate?
  • why is it so hard for me to obtain foreign currency?

Part I provides a refresher on what an exchange rate is and how it is derived.  Do note that xZoller is being used here to represent primarily the U.S. Dollar, but it could also be any other internationally traded currency, like the British Pound or the Japanese Yen.

Still got questions about what you have read so far?  You can drop some lines in the comments box below or send an email to

Merry Christmas in advance!  As we celebrate the season, do remember that there will still be life next month and next year, so do not spend it all in December :).


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Much Ado About FX (Part I of III): What is an Exchange Rate?


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A number of non-Nigerians wonder about the average Nigerian’s “fascination” with foreign exchange (FX) rates, and how when these figures sneeze (change), the entire Nigerian economic and financial systems seem to catch a cold. ¬†Many Nigerians do not understand why this number currently seems to be in freefall, and I have heard a number of conspiracy theories related to this phenomenon.

To make sense of all this, let us try¬†to understand what a foreign exchange rate, commonly referred to as “exchange rate” really is.

The xZoller

There is a product called the xZoller.  xZollers are used to purchase products and services from other countries.  Anyone leaving the shores of Nigeria has to purchase some xZollers to enable them conduct transactions in the other countries they visit.  xZollers are also what anyone selling products and / or services to customers in other countries would receive.  xZollers are a pretty neat nearly-essential commodity :).


Nigerians and companies in Nigeria have a number of products that they sell to people and companies in other countries (i.e. exports), with the most notable being crude oil. ¬†In exchange for these exports, we receive xZollers. ¬†This means that private individuals, private companies, and the Federal Government of Nigeria (FGN) receive xZollers in exchange for their respective export trades; FGN also receives xZollers from some of its tax receipts. ¬†FGN’s xZoller earnings are collected on its behalf by the Central Bank of Nigeria (CBN). ¬†So, the CBN and other Nigerian entities in the export business receive xZollers as a part of their everyday business activities,¬†hence are potential sellers of xZollers.

There is another major route through which xZollers make their way into the Nigerian economy: remittances from members of the diaspora. ¬†When Nimi – a young Nigerian woman who has recently resumed her new job in Boston, Massachusetts in the United States after completing her university program at Harvard – sends some cash to her mum¬†in Ibadan, Oyo in Nigeria through her cousin who came to visit, she is remitting xZollers to her mum, making Nimi’s mum a potential xZoller seller as well.


As mentioned earlier, anyone who needs to purchase goods and / or services from any entity domiciled outside Nigeria will need to obtain xZollers to complete the transaction.  So,

  • Gbenga, who is in school in Toronto, Canada, will need to obtain xZollers to pay his school fees.
  • Zainab, who owns a manufacturing plant that requires a particular raw material that she obtains from Sydney, Australia, will need to obtain xZollers to pay her Australian suppliers.
  • Adamu, who purchases cars from a car manufacturer in Tokyo, Japan for resale in Lagos, Nigeria, needs to obtain xZollers to pay the car manufacturer.
  • Temi, who buys her office shirts from stores in London, UK, will need to obtain xZollers to pay the retail stores.

As we can deduce, there a lot of potential xZoller buyers.

Exchange Rate

Any of these potential xZoller sellers cannot transact business within Nigeria with their xZollers as the legal tender¬†in Nigeria is the Nigerian Naira. ¬†So, when the FGN wants to pay the salaries of the federal civil service workers, or Nimi’s mum wants to buy groceries for the house, they will need to find people who would like to acquire some xZollers by parting with some Nigerian Naira. ¬†The seller and buyer would agree on how many Nigerian Naira will be exchanged for each xZoller, and this is what is called the¬†exchange rate.

Now that we know what an exchange rate is, how it is derived, and some of the participants in the FX market, we are ready to delve into the mechanics of Nigeria’s FX markets (Part II), as well as the reason why their colds seem to impact Nigerians and the Nigerian economy so severely (Part III). ¬†Do note that xZoller¬†is being used here to represent primarily the U.S. Dollar, but it could also be any other internationally traded currency, like the British Pound or the Japanese Yen.

Any questions or comments would be most appreciated, and can be provided in the box below or sent to

Until next week when Part II comes your way, keep safe, and remember not to spend it all in December :).




Money Basics: Don’t Spend It All in December

For those of us in Lagos, Nigeria, harmattan – and Christmas – is very much in the air :-). The retailers have put on the show to draw people in and dispense the contents of their wallets, with the “mind-blowing offers,” the “you must haves,” the “must-visit places,” and the “must-do things.” ¬†It is very easy to get caught in the commercial excitement of the moment, especially because the capacity to indulge for most is also increased during this period: bonuses, gifts, and most salaries get paid earlier this month. ¬†For those who think the Joneses are the gold standard, it is an even more financially hectic period.

Here is a reality check for us all though: after December comes January, and 10 other months before the next December. ¬†January is considered by many to be a long and gruelling month, primarily because the duration between the paydays in December and January is the longest in the entire year for most – an average of 37 days according to my guesstimate. It is also because December is filled with so many activities and holidays from school and work, while January is “empty” after the 1st day of the month / year.

Here is another major reason why January is so long: school fees are due at the beginning of that month! For some, rent is due as well; these two items are the largest monetary expenses for a lot of people.  In fact, for some, the financial behavior in December ruins the whole year ahead.

So, now that we have identified some of the ways financial problems are created, here are some of my proposed solutions:

  • Forget about keeping up with the Joneses! This will always be my number one advice because keeping up with the Joneses is not a sustainable basis for getting anything done in life because the truth is the Joneses are clueless and broke!


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  • Create an income-expense plan (some people call this a budget :-)). It would interest you to know that income-expense plans have been saving lives and fortunes since the beginning of time! ¬†No entity – individual or organisation – can have the kind of lasting progress a lot of us desire without¬†one of these.create-a-working-budget
  • View your finances through an annual lens. ¬†It is rather easy to focus on the cash inflows and outflows of each month on a per month basis. ¬†The reality for most of us however is that both our cash inflows and outflows vary by the month, and this is the case regardless of whether we work for an employer (private or public) or we employ ourselves. ¬†An annual view will help acknowledge this reality and make your income-expense plan more representative of your situation. ¬†It will also make it a lot easier to appreciate why you cannot afford to spend it all in December.


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  • Save and invest. ¬†One of the outcomes of your annual income-expense plan would be the need to save and invest, as some of the current income will need to be put aside to offset an expense later next
  • Remember the reason for the season: giving and sharing our fortunes with those less fortunate than ourselves, i.e. philanthropy. He who gives shall receive even more. ¬†Let us not forget those around us who could really do with a little bit of what we take for granted. ¬†Instead of buying your child that latest electronic gadget that she does not need, you could buy the monetary equivalent in rice and give to your domestic employees, or even school bags for their kids.


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  • And lastly, self-discipline. None of the above can be achieved without a healthy dose of self-discipline. We each need to love ourselves enough to be willing to forfeit instant gratification for a greater longer-term purpose. ¬†Just as we need to apply this to weight loss and keeping our bodies healthy, so we also need to apply this to keeping our finances healthy.


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Do you need the assistance of a professional with (i) creating an income-expense plan (ii) creating a savings & investment plan?  Feel free to drop me a line at

It truly is the season to be merry; my family and I wish you and yours the best of the season. ¬†Wouldn’t it be better if the merriment lasted all-year-long though? ūüôā


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