Nigeria’s Naira Stability Collides With a High-Cost Economy

The naira traded near ₦1,329 to the dollar for four consecutive sessions in September, from around ₦1,535 in July 2025.

Nigeria’s external reserves reached $54.6 billion by September 16, with the difference between official and parallel-market exchange rates at about 4.2%.

Annual inflation declined to 15.39% in August as the exchange rate became more stable, although many of the costs businesses face remain high.

Petrol reached roughly ₦1,400 a litre in Lagos and Abuja and diesel moved above ₦2,000, adding to what companies spend on transportation, generators and the movement of goods.

The Naira Has Become More Predictable

Foreign-exchange trading on FMDQ reached $125 billion between January and August, averaging about $772 million across 162 business days.

Import demand for dollars has eased this year, and the CBN has continued to supply the market through its interventions.

Nigerian Breweries recorded ₦153.3 billion in foreign-exchange losses in 2023 and ₦257.1 billion in 2024, then reported none in 2025 or the first quarter of 2026.

Nestlé Nigeria recorded a ₦290.7 billion FX translation loss in 2024 and none the following year.

Both companies still import some of the materials and equipment used in their Nigerian operations, leaving their costs exposed to movements in the naira.

Their latest accounts no longer carry the large currency losses recorded during the steep depreciation of 2023 and 2024.

Inflation Is Slowing Without Reversing Nigeria’s Price Shock

Nigeria’s Consumer Price Index moved from 145.3 in July to 146.3 in August, as annual inflation fell to 15.39% and the monthly rate slowed from 1.57% to 0.71%.

Food prices were 19.57% higher than a year earlier, though the increase recorded during August was 1.02%, down from 5.56% in July. Core inflation declined to 13.29% from 14.97%.

Food and non-alcoholic beverages accounted for 6.16 percentage points of the annual rate; transport accounted for 1.64 points and housing, water, electricity, gas and other fuels 1.30 points.

Urban monthly inflation fell from 1.90% in July to 0.28% in August. Rural inflation moved in the other direction, rising from 0.78% to 1.79%.

Energy Costs Remain High for Nigerian Manufacturers

Manufacturers spent ₦1.34 trillion on alternative power in 2025, after spending ₦1.11 trillion in 2024 and ₦781.68 billion in 2023.

The Manufacturers Association of Nigeria puts energy at about 35% of production costs, with electricity supplied to factories averaging 13.1 hours a day in the second half of 2025, down from 16.7 hours in the first.

Dangote Cement recorded ₦184.87 billion in energy expenditure in the first quarter of 2026. Over the same period, BUA Cement spent ₦67.34 billion and Beta Glass ₦8.01 billion.

Manufacturing capacity utilisation fell from 61.3% in the first half of 2025 to 57.7% in the second, before MAN’s CEO Confidence Index rose from 48.7 in the first quarter of 2026 to 52.1 in the second.

Nigeria’s Next Economic Gains Depend on Production Costs

Manufacturers entered 2026 after capacity utilisation fell in the second half of last year, with alternative power still taking a large share of production spending.

Electricity supply and the cost of moving goods remain expenses companies have to absorb before products reach the market.

The coming manufacturing and investment data will provide a clearer picture of production under those conditions.

Non-oil exports and company results will add evidence on whether businesses are selling more and retaining more of the revenue they generate.

The naira is more stable and inflation is lower. Further gains in the economy now depend on what happens to the cost of producing goods in Nigeria.