WHAT IS EXCHANGE RATE?
Exchange rate of a country is simply
how much another country's currency costs in the country. In other words it is
the amount of money needed by people in a country to buy another country's
money. For instance, money used by Nigeria is called Naira while the money used
by America is called dollar. If Miss Ijeoma who is from Nigeria wants to buy
American dollars, how much naira does Miss Ijeoma have to pay to buy one dollar? The
amount Miss Ijeoma will pay to get one dollar is what we call exchange rate. What
if Mr. Whitehead from America wants to buy Nigerian naira, how much dollar will
he spend to buy one Naira? This amount is also called exchange rate. For Miss Ijeoma, it is the Nigerian exchange rate, while for Mr. Whitehead it is the
American exchange rate.
At present (February, 2016), the
official government approved exchange rate of the Naira to the dollar is 199
naira for 1 dollar and 375 naira to 1 dollar in the parallel market, while that
of Naira to pounds is 284 naira to 1 pound and 400 naira to 1 pound in the
parallel market. The parallel market simply means other sellers of foreign
currency, apart from government. So if Miss Ijeoma wants to buy 1 dollar she will
pay the sum of 199 naira; if she wants to buy 1 pound, she will pay 284 naira.
Stay posted for part 2……..
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