Being an importer comes with its own baggage. An unstable exchange rate is one of them. Imagine waking up every day and learning from your freight forwarder that the exchange rate has changed.

The sad part is that neither you nor the freight forwarders have control over it. The market demand and supply forces as well as the government control what the current exchange rate should be.

As an importer, this means you have to always be on the lookout for the latest updates from the market and stay up to date with exchange rates for your business.

An exchange rate is the value of a currency against another when being converted. Let me explain using the Chinese Yuan as an example. 1 Yuan to Naira is officially N63.73 naira but because of the unavailability of this currency, many importers get help from recognized freight forwarders like Naiyuan Mart to pay their Chinese’s suppliers and manufacturers.

Some factors often influence the exchange rate and these are:

Economic growth

If a country’s economy is strong, the currency will be strong too and vice versa. Comparing Naira against the USD, the exchange rate is quite high and that’s because of America’s strong economy. This may change in the future.

International Trade

This is simple. When a country exports more, it makes their currency stronger and the economy grows but when a country imports more, it weakens their currency and makes the economy dependent on external factors which makes it weak. If you are an importer or exporter, whether you make a profit or loss depends on which side of the trade you are on.

Interest Rate

If a currency has a high-interest rate, it often makes the currency strong.

Scarcity

When a currency is scarce and unavailable in financial institutions. Such currency usually becomes strong especially if it is used a lot within international trade.

Acceptability

If a currency is popular, accepted, or perceived as more value for trade, it usually makes the currency stronger.

One thing to note is that the exchange rate will always be unstable as it is solely dependent on the economy. Being a business owner, it is very important to have this in mind and stay up to date with economic news and financial updates. Despite this, what can you do as a business owner to stay afloat and run your business profitably? Here’s how to make profit as an importer despite an unstable exchange rate.

1. Seek Financial Advice

As a business owner, it is advisable to always consult your bank or financial advisor for the best option whenever you want to buy goods. This helps you know what is best for you and your business at any given time. Never get tired of seeking advice.

2. Get a foreign account

Opening a domiciliary account helps you stay on top of currency instability. You can pay bills from this account to your suppliers or receive payments.

3. Use the Help of Freight Forwarders

Using the help of freight forwarders to pay your suppliers also comes in handy especially if the freight forwarder is domiciled in the country where you are buying from. For instance, Naiyuan Mart is domiciled in both China and Nigeria and they can help you source goods and get your best deal while you pay into their Nigerian bank account. Find out more here.

4. Reach an agreement with your supplier

Sometimes, you have to reach an agreement with your supplier that in your market order you can request a foreign exchange conversion of a specific amount or exchange rate on goods. This will guarantee that your order will be executed but the price may not be guaranteed. 

5. Update your customers

Keep tabs on updating your customers as much as possible and create a window to sell more to them. For example, you can inform your customers that the price may soon change with an increase of 2% but they will get it for the old price if they buy 2 or more pieces or if they buy within a certain period. This helps you inform your customers ahead even if the price changes and also sell faster.

6. Design a profit margin that includes the unstable factor of the exchange rate

One of the best ways to do this is to create a profit margin that includes the factor of instability of the exchange rate. For example, if you buy a product at N5 after the exchange, shipping is N2, this makes the total cost to be N7. You can decide that the profit margin is 5-6% of the total cost. This means that your profit margin is depending on the current exchange rate.

Although this option doesn’t always work because your prices will be unstable, it helps you know that you can either choose the lowest of the profit margin if the currency is stable for that transactional period or you can choose the highest profit margin percentage if the currency rate increases. Knowing when to do this is a smart move for business owners. You can make this discount policy for your customers too.

7. Competitor Yardstick

How much is your competitor currently selling for the same product? Many times, you can learn from your competitors to know the selling price of your product in the market and how best to put it forward to your customers to understand that it is what your competitors charge as well. Then your customer retention strategy comes in handy here.

Knowing all these, you must bear in mind that the currency exchange rate is very unstable and volatile. It is expected of you as an importer to stay up to date and get first-hand information from freight forwarders like Naiyuan Mart so you don’t run at loss. You can follow us on Instagram, Linked In, and Facebook to get the current exchange rates.

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