The Real Cost of the Naira's Managed Float

Two years have now passed since the Central Bank of Nigeria unified the official and parallel exchange rates in what amounted to a managed devaluation of the naira. It is time for an honest accounting.

The reformers argued that unification would attract foreign investment, restore confidence among international creditors, and reduce the distortions created by multiple exchange rates. They were right about the distortions. The unified rate has reduced the space for round-tripping and made life simpler for legitimate businesses that were forced to hunt for foreign exchange across different market windows.

But the full cost of the transition has not yet been honestly presented to the Nigerian public — or fully acknowledged by the officials who championed the reform.

**Who Won**

The beneficiaries of naira unification are relatively clear. Foreign portfolio investors who had been locked out by an overvalued official rate could finally exit at a market-determined price. Exporters and diaspora remittance senders received more naira per dollar. International oil companies that had been frustrated by the inability to repatriate profits found their operating environment somewhat improved.

Nigeria's external reserves, despite pressure, have not collapsed as some predicted, partly because the improved policy environment encouraged multilateral lending at lower rates.

**Who Lost**

The losers are far larger in number. Importers — and through them, every Nigerian who buys food, medicine, or manufactured goods — faced immediate and substantial cost increases. The naira's depreciation fed directly into consumer prices, contributing significantly to the inflationary surge that has squeezed household budgets for two years.

Small businesses that import raw materials but sell in naira faced an impossible squeeze. Many have contracted, laid off workers, or closed entirely. The informal sector — which employs the majority of Nigerians — has no hedge against currency risk.

**The Arithmetic of Monetary Sovereignty**

Nigeria's monetary policy dilemma is ultimately structural. A country that imports most of its manufactured goods, refined petroleum, and pharmaceuticals while exporting primarily crude oil has limited room to manoeuvre. The naira's value is fundamentally a function of oil prices, production volumes, and the CBN's ability to manage flows.

No amount of policy sophistication can fully insulate Nigerian households from the consequences of a currency whose underlying fundamentals depend on a commodity priced in foreign currency.

**What Leadership Must Now Acknowledge**

The unification was necessary. But necessary reforms can still be badly managed. The transition was too abrupt, the social protection response was too slow, and the public communication was too technocratic to build the popular understanding that painful reforms require.

If Nigeria is to sustain the progress made, its leadership must acknowledge the asymmetry: the benefits of unification have flowed disproportionately to capital owners and the formally employed, while the costs have been borne disproportionately by workers, pensioners, and the poor.

Rectifying that asymmetry — through stronger social transfers, targeted food subsidies, and investment in productive capacity — is not optional. It is the price of reform legitimacy.