Why Nigerians save money in foreign currencies

Posted by Felix Okoli on Thursday September 18, 2014 at 12:56:16:

There are some Nigerians who prefer to save money in foreign currencies rather than saving it in the Naira.

Some save their money in foreign currency(Domiciliary) accounts while some save it in foreign bank accounts. Why do they do so? Are there any benefits of saving money in foreign currency?

Well, you can't really blame those Nigerians for acting that way because even the CBN saves most of our money in foreign currencies and we know of former military rulers in Nigeria's history who moved money to Swiss and other foreign banks while in office. They had their reasons for doing so. They wanted better safekeeping and a way to store the value of their riches over a long period of time.

Some reasons why Nigerians save money in foreign currencies
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1. Better security and insurance:
One of the reasons that I've noticed why Nigerians save money in foreign currencies is for better safekeeping. Some people don't trust the Nigerian banking industry as much as they trust foreign banks, especially banks in Western nations like the UK, Switzerland or the USA. You can't really blame them because those countries have been in the banking industry for several years and tend to have bigger companies offering them insurance. In Nigeria, some rich people find that banks don't offer them much security or insurance as foreign banks would offer them. Last time I checked, the NDIC could only insure just N500,000 for individuals who save money with them. Where do you expect a Nigerian who who has billions of Naira to save his money?

2. To Store the value of their currency:
Another reason I've noticed on why Nigerians prefer saving money in foreign currencies is on the issue of currency depreciation. The Nigerian Naira is weak compared to other foreign currencies such as the Strong US Dollar, or Sound British Pounds and would only lose value much quicker over a period of time than the other foreign currencies. From what we were taught about Economics in school, when a nation imports more than it exports, it's currency would only lose value and you'd see that in Nigeria, it seems we are hardly competing against those Western markets. The only major thing we export for now is Crude oil and yet we also import Petrol. You only need to check the historical value of the Nigerian Naira against those currencies from 1985 till date and you'll see what I'm talking about. If someone saved $10,000 in a bank account from 1985 till 2014, his savings won't lose much value but if the person had saved that same amount in the Nigerian Naira, it would have lost more value.

3. To do International business:
A third reason why Nigerians save money in a currency other than the Naira is in order to have easy access to foreign products and services. Most services and products being sold in foreign currencies are normally priced in foreign currency. Things like health care, fashion accessories, electronics, hotels, educational services and so on are priced in currencies like the US dollar or British Pounds and so the only way Nigerians can buy it is by paying in that currency. Because of this need to do business abroad, many Nigerians are made to convert their Naira to that currency in order to proceed with the business transaction.

4. Better laws and better saving environment:
Another reason why some Nigerians save money abroad is because of better laws that offer a better home for their money. At times saving money abroad allows them to avoid having to be persecuted at home or avoid laws that make it unfavourable to save in Nigeria. If you noticed that one of the reasons why a lot of Igbo people were impoverished after the civil war of the 1960s was because most of them had savings in Nigeria and so it was only few of them that moved money abroad that remained rich even after the war. After the war, the Yakubu Gowon regime only offered just 20 Pounds to every bank account holder irrespective of whether the person had 1 million Naira or not in their bank.s

At times, even politicians who make money during their reign tend to move money abroad to avoid persecution by the govt.

War-like situations and unfavourable laws tend to encourage Nigerians to move their money abroad for better safekeeping.