What every Nigerian must know about the Exchange rate: Part 4

EXCHANGE RATE APPRECIATION AND DEPRECIATION

The price of money can rise and fall like any other item in the market, depending on the way people are demanding for them. For example, the price of 1 dollar in Nigeria as at 2010 was 111.58 naira, but in 2009, it was 125 naira, now(February, 2016) its cost 199 naira. So between 2009 and 2010 the price of Dollar fell from

 125 naira to 111.58 naira therefore, we say that the value of the Nigeria naira ‘appreciated’ by 13.42 naira between 2009 and 2010. Also, between 2010 and 2016, the price of the dollar increased from 111.58 to 199 naira; therefore, we say that the value of the Nigeria naira has ‘Depreciated’ by 87.42, between 2010 and 2016. Based on this, we can define exchange rate APPRECIATION as a decrease in the price of foreign money, which causes an increase in the value of our money, while exchange rate DEPRECIATION is simply an increase in the price of foreign money which reduces the value of our local money (Naira). Presently, the Nigerian exchange rate is depreciating rapidly with the price of dollars rising rapidly from 158 naira to about 199 naira in less than six months. Obviously, something has to be done about this.