Weak naira opens opportunity for diaspora Nigerians to buy assets on the cheap

Nigeria’s foreign-currency shortage is squeezing the life out of Africa’s largest economy, but the weak state of the naira, however, holds opportunity for Nigerians in the diaspora.

With three devaluations by

the central bank, the naira has depreciated by over 27 percent in 2020, meaning that Nigerians abroad who are earning in foreign currencies will have more naira at their disposal than they had last year or at the beginning of this year.

As the dollar shortage in Nigeria persists amid fall in oil prices resulting from the global demand drop in the wake of the coronavirus pandemic, the central bank weakened the naira on the official window to 390 against the dollar.

Naira plunged to as low as N500 against a dollar on the black market last week before paring some of those losses to close at N475 Friday, according to data by Abokifx, a platform that collates rates from street traders in Lagos. That leaves a spread of N85/$ between the black market rate and official rate.

The spread has widened this year as the CBN battles with reduced dollar inflows on the back of lower oil prices. The naira’s volatility has been exacerbated by the CBN’S demand management tactics which failed in 2016 during the last dollar crisis in the country.

The naira’s tumble this year could work in the favour of Nigerians in the diaspora as the weaker currency gives more value to their foreign remittances.

Using the CBN’S official exchange rate of N390/$, a Nigerian earning in dollars will have 27 percent increase when they covert $1,000 to naira. Using the black market rate, it will be an increase of 31 percent.

In 2019, when the official exchange rate was pegged at N307/$, $1,000 was equivalent to N307,000, but with the currency devaluation, the same $1,000 will give N390,000 in today’s market.

Using the black market rate estimate of N360/$ in 2019, $1,000 was equivalent to N360,000 at the time. Today, the same amount is equivalent to about N475,000, according to data from Abokifx.

“A weaker exchange rate in Nigeria holds investment opportunities for Nigerians in the diaspora to invest in real estate because all of a sudden assets are now cheaper,” said Tayo Odunsi, CEO, Northcourt.

For example, a real estate property that was sold for $30,000 (about N9.2m) in 2019 when the exchange rate was officially at 307/$ is now going for $18,500 (N9.2m) due to the almost 27 percent devaluation of the naira.

“The devaluation of the naira presents an opportunity for eagle-eyed Nigerian property investors in the diaspora to add more properties to their investment portfolio because the lower value against the foreign currency gives them the opportunity to buy more for less,” Freeman Osonuga, a property broker and MD of Adloyalty Business Network, said.

To attract more remittances from its diaspora to boost foreign currency liquidity, the central bank last Monday released a circular stating that diaspora remittances should be paid in cash in US dollars or into a domiciliary account. In the past, remittances would be paid in naira and the central bank restricted domiciliary account usage.