The Nigerian Naira at 1,590: Currency Depreciation, Inflation and What Investors Need to Know

The naira trades at approximately 1,590 to the dollar, down 12 on the week. Before the June 2023 liberalisation the official rate was held at around 460 while the parallel market cleared closer to 750 — a gap that made the official number close to meaningless for anyone who actually needed to buy dollars.

The float did what floats do. It moved the official rate to where the market was, and then further. Two thirds of the nominal depreciation since 2023 is the closing of that gap rather than new weakness; the remainder is the market repricing a currency whose supply of dollars depends on oil at $60.40 a barrel. The convergence itself was the point: a single rate that clears is worth more to a business than a favourable rate it cannot access.

Inflation is the transmission mechanism most people feel. Nigeria imports a large share of refined fuel, wheat, and pharmaceutical inputs, and every one of those repriced through the naira. The Central Bank of Nigeria responded with a sustained tightening cycle, taking the policy rate to levels not seen in two decades. That has helped stabilise the currency and has made borrowing prohibitive for exactly the small businesses that a competitive exchange rate is meant to help.

For a foreign investor there are two separate questions and they get confused constantly. The first is whether the naira will depreciate further — plausible, but a weak currency is not by itself a reason to stay away. The second is whether you can get money out at the rate you can see, which for several years you could not. The liberalisation improved the second question much more than the first, and the second is the one that determines whether a return is real.

The NGX All-Share is up approximately 14.2% year to date in naira terms. A dollar investor who bought at the start of the year and sold now would have given a substantial portion of that back to the currency. That is the arithmetic of African equity investing in a single line, and it is why the currency page and the equity page on this site are worth reading together.