Oyindamola Ogunbowale
The naira’s dramatic fall in value since 2023 has gone far beyond the foreign exchange market.
It has affected the price of imported goods, business costs, household spending and even the way some Nigerian companies report their earnings.
But what exactly happened to the naira, and why does it matter? What does devaluation mean? Simply put, when the naira loses value against the dollar, Nigerians need more naira to buy the same amount of dollars.
For example, if $1 moves from ₦500 to ₦1,500, $100 that once cost ₦50,000 would now require ₦150,000.
Devaluation usually refers to an official downward adjustment in a currency’s value, while depreciation describes a fall driven by market forces.
What happened to the naira? Nigeria began a major foreign exchange reform in June 2023, when the Central Bank of Nigeria allowed the naira to trade more freely on the official market.
The currency immediately lost significant value, and further pressure followed in 2024, when the official rate fell to above ₦1,500 to the dollar at one point.
Although the naira has recorded periods of recovery and greater stability since then, it remains considerably weaker against the dollar than it was before the 2023 reforms.
Why did prices rise? Nigeria relies heavily on imported goods and production inputs.
Businesses often need foreign currency to pay for machinery, raw materials, medicines, electronics and other supplies. When the naira weakens, those imports become more expensive in naira terms.
Businesses may then increase their prices to cover the additional cost, meaning an exchange-rate problem can eventually become a household-budget problem.
Why can a weaker naira benefit foreign earners? The effect is different for people and companies earning foreign currency.
If a Nigerian company earns $100 million abroad, that income would be worth ₦50 billion at ₦500 to the dollar.
At ₦1,500 to the dollar, the same $100 million becomes ₦150 billion when converted into naira.
The company has not necessarily earned more dollars; the difference comes from the exchange rate.
This is also why the foreign subsidiaries of some Nigerian banks have made a larger contribution to their reported naira earnings and assets following the currency’s sharp depreciation.
What does it mean for Nigerians? For most Nigerians who earn in naira, the impact is straightforward: foreign goods and services become more expensive, while businesses face higher costs for imported inputs.
For those earning dollars, pounds or other foreign currencies, however, their income converts into more naira.
That contrast captures the wider effect of the naira’s decline.
A weaker currency can increase the naira value of foreign earnings while simultaneously reducing the purchasing power of people whose income remains in naira.
What began as a foreign exchange reform has therefore become a development with consequences reaching into Nigeria’s markets, businesses and everyday household spending.
