Every Cross-Border Family Loan Is an FX Contract
Someone asked a simple question this week: how do I repay the $1,000 my U.S. cousin sent me? Buried inside every cross-border family loan is a foreign exchange contract. Almost nobody reads it, because almost nobody writes it down. Here is the part that never gets priced in. If the loan is denominated in dollars, the borrower in Nigeria absorbs all naira depreciation before repayment. If it is denominated in naira, the lender in America absorbs it. Same loan, two different risk profiles, decided by a single word. On September 25, $1,000 was roughly ₦1.326 million at the official rate, ₦1.374 million parallel. If the naira slides 20% before repayment, a dollar-denominated repayment costs the borrower 20% more in naira than what they received. The loan never changed. The currency did, and the borrower paid for it. Three questions settle it before money moves: what currency is the obligation denominated in, who bears the exchange-rate move, and what happens if the naira moves 20% either way? Settled in writing, the loan stays a loan. Unsettled, it becomes a speculation neither party signed up for. Every cross-border family loan is an FX contract. Most are never written down. #usa #nigeria #investing #money #capital
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