WHY ARE WE ALWAYS MEASURING EXCHANGE RATE WITH
DOLLAR?
The reason is that the American
dollar is the most stable currency, this means that the value does not increase
and decrease like that of other currency. For instance, if the naira was used
as a standard measure it will be bad because the value keeps fluctuating. I can
buy recharge card in March with 100 naira, by December I can’t buy it again;
it’s now 110 naira then the next year it changes. In 2011, 1500 naira could
take me from Lagos to Awka, but now that amount of money cannot, it’s now 4000
naira and above. The American dollar value does not change like this, that’s
why it is used as a standard measure.
You need to buy dollar or other
foreign currencies, when you want to purchase goods from other countries or
abroad. If you want to buy goods, for example a car, from a foreign country,
they will not accept you paying them in Naira, they will want you to pay them
in their own currency or most preferably in dollars. In short, one needs to buy
dollars when he wants to buy from abroad (this is called importation).
It
gets interesting with part 4……
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