When inflation happens, the value of money decreases as prices of goods and services increase. And if your earnings remain the same, you’ll spend more on the same products and get less.
But does saving in US Dollars (USD) protect your money? In this article, you’ll learn about how people save in US dollars and still make money from it using US Dollar savings
What is Inflation?
Inflation is the process by which currencies lose value over a period of time. During this period, the prices of goods and services continue to increase, and ultimately, people need to pay more to buy fewer products. This is why a car that cost 2 million Naira two years ago is almost double that price today.
Inflation has been one of the biggest economic challenges since time immemorial. Most economists believe a certain level of inflation is healthy for any economy. In other words, like death and taxes, we cannot avoid inflation no matter how hard we try. But high inflation rates can be bad for governments and citizens.
Unfortunately, saving in your local currency might not be the best thing. And this is why you see people saving in US Dollars instead.
How Do People Use the US Dollar to Preserve their Money?
Economic-conscious people save in dollars to shield against inflation and the devaluation of their local currencies. USD is the unit of value for both traditional and decentralized finance, and it’s considered the most powerful currency in the world.
The US economy is one of the most stable economies in the world, so its currency dominates others in the markets. This means when a country like Nigeria experiences economic challenges and its Naira depreciates, it doesn’t affect the USD.
So, people often invest in stocks and bonds during inflation since they are dollar-backed investment opportunities. Other people invest in gold and real estate or save in their USD domiciliary accounts. These investments provide decent returns over time and assure investors that their money is safe, even during harsh inflation periods.
Why Should You Save in Dollars?
Picture this: if you wanted to buy a decent 2011 foreign-used Toyota Camry in 2018, you would probably have been looking at spending somewhere around 2.5 million Naira ($6,000 at the time). This year, that same car is worth anywhere from 4 million ($4,500) to 5 million Naira ($6,000), depending on its specs.
Imagine two brothers who had 2.5 million each in 2018. One saved it in a bank account as Naira with an annual interest rate of 10%. The other brother converted it to US Dollars at a rate of 365 Naira to 1 Dollar and got about $6,000. Next, he saved it on an app like Quidax with an annual interest of 10%.
In 2022, the first brother would have 3,060,250 Naira, which would be $3,517, excluding the bank charges of about 2,000 Naira a year. The other brother who saved on Quidax would have $8,787 at an annual interest rate of 10%, which would be about 7.6 million Naira in 2022.
Both brothers saved money, but one saved in dollars, which made a difference. Here’s a breakdown:
|Savings type||Saved in Naira at 10% annual interest||Saved in dollars at 10% annual interest|
|Where did they save the money?||He put the 2.5m in a savings bank account.||He converted his 2.5m to $6000 at $1 = 356 (2018 exchange rate)|
|At the end of Year 1 (2019)||2.75m||$6,600|
|At the end of Year 2 (2020)||3.02m||$7,300|
|At the end of Year 3 (2021)||3.32m||$8,000|
|At the end of Year 4 (2022)||3.66m ($4,186 at $1 = 860)||$8,800 (7.6m at $1 = 860)|
Are Dollars Accessible to Everyone?
As much as people want to save in dollars, the currency isn’t easily accessible in African countries like Nigeria due to limited forex reserves. The dollar shortage makes it extremely difficult for people to invest, save, and transact with USD.
For example, Nigerian banks have been complaining of dollar shortages this year, making it more expensive and difficult for people to access dollars.
So, as much as there’s an ongoing awareness about the importance of saving in dollars or making dollar-backed investments, people are limited by the dollar shortage in many countries of the world – especially African countries with harsh economic realities.
How to Still Save in Dollars Easily
Quidax offers up to 10% annual interest and allows you to start saving with less than 5,000 Naira. The interest is paid daily into your wallet.
With Quidax, you can use Naira or crypto to save in US Dollars
You need to download the Quidax app and sign up to save your Naira or cryptocurrency as US dollars. Fund your account with any amount of your choice and use the save option in the app.
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