This is in regards to Nigeria’s currency (Naira) weakening and causing the ‘dollar shortage’ in the country to deepen.
In: Economics
US dollars are trusted money all over the world. If you pay for something with US dollars, people know that that money won’t become suddenly worthless in a month or a year or the like. People freak out when the US dollar *briefly* has 8% inflation, not because that is actually crazy bad (it isn’t *good,* but it isn’t horrible either), but because it’s *weird,* USD are normally very stable.
Many other countries do not have a stable, reliable currency. Their currency is weak. Maybe it’s untrustworthy, maybe the government prints bad money, maybe there’s a counterfeit problem, maybe the government itself is unstable, etc. Whatever the problem, the money isn’t good money. As a result, people want to get good money they know will hold onto its value…and as stated, everyone sees USD as good money.
This means people will try to get rid of their bad local money and pick up as much good USD as they can, which will suck up all the USD out of the economy, and leave only the bad money moving around. This exacerbates the badness of the bad money and artificially inflates the value of the good money, creating a death spiral for the bad money.
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