In September, the naira exchange rate plummeted to a historic low of ₦1,000/$ on the parallel market. The signs had always been there but that hardly changed anything. By the end of October, to get a dollar in the more accessible black market, you’d have needed to fork over more than ₦1,200.
Weirdly, the slide began when the CBN announced the decision to float the naira back in June. The idea was to unify the FX rates. That hasn’t happened. The gap has remained and observers who warned about the negative consequences of the decision have been proven right.
Bleak economics for Nigerians
Since closing at about ₦750 on the I&E window on the 30th of June, both the official and parallel market rates have risen.
This has been detrimental to the average Nigerian. The cost of food has gone up, as has the cost of petrol. One might need to pay up to ₦700 for a litre of the latter, depending on location. Meanwhile, buying a bag of rice would set you back around ₦60,000. To get a kilogram of turkey at retail prices is to pay about ₦5,550. The festive season will be tricky for many families.
On X (formerly Twitte), one user described the situation in a post: “Cost of living in Nigeria has tripled in the last 12 months. Private sector & business owners have adjusted their prices to reflect the times, while civil servants still earn exactly the same salary they were earning 12 months ago.” This poultry business owner had to shut down his operations and leave the country after petrol prices surged. He can be considered lucky, being one of the fortunate few still able to afford the cost of japa-ing.
Many others will have to forgo their dreams. As another user on X explains, an exchange rate of ₦1,500 to £1 is highly unfavourable for those seeking to study in the UK: “Half deposit for university £5,000 is now ₦7,500,000. Add flight and tuberculosis…Something that used to be ₦4.5m last year November.”
Perhaps only those with the privilege and foresight to save money using Flex Dollar on the PiggyVest app will weather the storm.
As expected, the authorities are concerned. In early September, the acting CBN Governor, Folashodun Adebisi Shonubi, assured Nigerians that in collaboration with commercial banks, steps were being taken to clear the FX backlog. That process has begun. The CBN also lifted the forex ban on 43 items.
These actions appeared to provide a glimmer of hope. One day over the past fortnight, the naira rose to ₦1,004/$1 on the parallel market and ₦793/$1 on the official market after trading for ₦1,142/$1 and ₦799/$1 only the day before.
What lies ahead for Nigerians?
That recovery was brief. The dollar is once again exchanging for over ₦1,100 in the black market.
Those receiving remittances from loved ones abroad may benefit from a weaker naira, but unless the sums received are substantial, the challenge of increased prices may wipe off the benefits accrued from receiving more naira for a fixed amount of dollars. Even so, such a person is luckier than those who have yet to receive a salary increase since the naira was floated by the government.
As the holiday season approaches, many families will be hoping something changes. The alternative will be hard to take.