Nigeria’s Currency Has Fallen to a Record Low as Inflation Surges

A man sells sachet soup items at the Mile 12 Market in Lagos, Nigeria, Friday, Feb. 16, 2024

Nigerians are facing one of the worst economic crises in West Africa in years triggered by rising inflation rate, following monetary policies that have dipped the local currency to an all-time low against the US dollar, provoking anger, and protests across the country.

The latest government statistics released Thursday showed that the inflation rate in January rose to 29.9%, its highest since 1996, mainly driven by food and non-alcoholic beverages.

The naira itself further plummeted to 1,524/1$ on Friday, reflecting a 230% loss of value in the last year.

It worsens an already bad situation, further eroding incomes and savings while squeezing millions already struggling with hardship due to government reforms that saw the removal of gas subsidies, resulting in gas prices tripling and transport fares spiking.

With a population of more than 210 million people, Nigeria is not just Africa’s most populous country but also the continent’s largest economy.

Its GDP is driven mainly by the service sector, such as information technology and banking, followed by the industry sector, including manufacturing and processing businesses and then agriculture.

“Everything is too expensive; they should help us,” said Obiajulu Blessing, a mother of three who came to the market to get some food for her family in Nigeria’s commercial capital Lagos.

The challenge is that the economy is far from sufficient for Nigeria’s booming population, relying heavily on imports to meet the daily needs of its citizens from cars to cutleries.

Therefore, it is easily affected by external shocks such as the parallel foreign exchange market that determines the price of goods and services.

The economy itself is heavily dependent on crude, so when crude prices plunged in 2014, authorities continued to use foreign reserves to stabilize the naira amid multiple exchange rates.

The country continued to subsidize fuel using scarce external reserves while shutting down the borders in a push for self-sufficiency and limiting access to the dollar in the official market for importers of certain items. As a result, food prices were rising as a parallel market for the US dollar boomed.

For trader, Adeniyi Bisola, there’s too much hunger.

“For some when they eat in the morning, they only get to eat at night while others do not even have access to food,” she said.

Shortly after taking the reins of power, President Bola Tinubu took bold steps to fix the ailing economy and attract investors.

He announced the end of the costly decades long gas subsidies which the government said were no longer sustainable, while the country's multiple exchange rates were unified to allow market forces to determine the rate of the local naira against the dollar, which in effect devalued the currency.

However, analysts say there were no adequate measures to provide alternatives for citizens and the government doesn’t seem to know what to do.

“This is quite unfortunate because somehow it seems like the government hasn't been able to get a handle of it, and it has been increasing, and it keeps increasing right now,” says strategy consultant Dipo Oyewole.

President Tinubu himself has directed the release of food items such as cereals from government reserves among other palliatives to help cushion the effect of economic hardship.

The government has also said it plans to set up a commodity board to help regulate the soaring prices of goods and services.

It is far worse for some in conflict zones in northern Nigeria where farming communities are no longer able to cultivate what they eat as they are forced to flee violence.

Pockets of protests have broken out in the past weeks, but security forces have been quick to quell them, even making arrests in some cases.

In the economic hub of Lagos and other major cities, there are fewer cars and more legs on roads as commuters are forced to trek to work.