What Is the Nigerian Naira (NGN)?

NGN is that the currency code for the Nigerian naira, the official currency for the Federal Republic of Nigeria. The Nigerian naira is formed from 100 kobos. As of December 2020, 1 U.S. dollar is adequate to around 380 NGN.

KEY TAKEAWAYS

The Nigerian naira (NGN) is that the official currency of the Federal Republic of Nigeria.

The financial institution of Nigeria manages and distributes the Nigerian naira and attempts to take care of price stability with it.2 

The naira has been continually devalued since its inception in 1973, and inflation remains above 10% as of 2019.3 

Understanding the Nigerian Naira

The Nigerian naira replaced the country’s use of the British pound in 1973. Pound to naira conversion was set at a rate of two nairas for each pound.4 By 2008, inflation had dramatically devalued the currency. the govt made plans to once redenominate the currency from 100 old nairas to 1 new naira but suspended those plans.5 

The U.S. dollar is that the hottest exchange currency pair involving the NGN. The currency has been pegged to the U.S. dollar at various levels over the years.6 As of December 2020, the USD/NGN rate of exchange hovers near 380. meaning it takes 380 NGN to shop for one USD.1 

The financial institution of Nigeria manages and distributes the Nigerian naira. one among the bank’s primary roles to regulate the inventory of NGN in circulation, also to make sure the country’s financial security and plan to keep prices stable.2 

Nigerian Naira Banknotes and Coins

Naira coins and notes are minted by the Nigerian Security Printing and Minting Company, with some currency also produced by overseas printing companies.7 

Coins include the 50 kobos, 1 naira, and a couple of nairas pieces circulated since 2007. Banknotes include the 5, 10, 20, 50, 100, 200, 500, 1000 nairas notes; 50 kobos and 1 naira notes are not any longer in use.8 In 2014, the financial institution released a commemorative note celebrating the nation’s independence. This commemorative note features a quick-response code (QRC) that when scanned takes the user to an internet site about Nigeria’s history.9 

The Nigerian Economy

Nigeria is found on the West Africa coast and derives its name from the Niger. The region was home to several ancient and prosperous societies before falling under British colonial rule in the 1800s. In 1960, the territory became the independent Federation of Nigeria. Shortly after, the country spiraled into a war that lasted until the 1970s. France, Egypt, Britain, and therefore the Soviets meddled within the country during the years of war. Until 1999, the leadership of Nigeria alternated between elected officials and military dictatorships.10 

Military rule, political corruption, and mismanagement damaged the economy and ran up massive foreign debt. Nigeria defaulted on its debt as oil prices fell within the 1980s. Renegotiation of its Paris Club debt occurred in 2005, and in 2006 Nigeria cleared its debt.11 

Widespread and rampant inflation has been a big problem for the Nigerian economy. The rate of inflation in Nigeria soared quite 70% in 1995. Since then, inflation has averaged around 12 percent.3 Improvements in controlling inflation are attributed, a minimum of partially, to fewer increases within the cost of critical staples like utilities and food. Between 2016 and 2019, interest rates have moved between 11% and 14%.12 

According to International Bank for Reconstruction and Development data, Nigeria may be a lower-middle-income emerging market that’s still battling the impact of inflation. The country experienced 11.4% annual inflation and gross domestic product (GDP) growth of two .2% in 2019.3 13 

Example of NGN On Forex Markets

Assume the rate of exchange for the USD/NGN is 361. this suggests it costs 361 nairas to shop for one U.S. dollar. Currency dealers and banks won’t offer this rate when looking to exchange one currency for the opposite in cash (digitally or physically), since they’re going to incorporate their exchange fee into the speed. Therefore, someone converting NGN cash to USD cash may pay 379 NGN for one USD, about 5% more.

This 5% markup, is that the bank or dealer’s profit on the transaction. Fees to exchange physical currencies typically range from 0.5% on larger amounts of currency to up to five or more, counting on the currency being exchanged and therefore the amount of currency.

On the flip side, someone who wants to convert U.S. dollars into NGN won’t get 361 of them either. they’ll get 5% less (based on what the bank or dealer charges), which suggests that for every U.S. dollar they’re going to receive roughly 343 NGN.

If the rate of exchange goes from 361 up to 400, meaning the naira has decreased in value because it costs more naira to shop for one USD. If the speed were to be lowered to 320, that might mean the naira has increased in value against the USD, because it now costs less naira to shop for a USD.

The naira tends to fluctuate more against other currencies since the financial institution of Nigeria monitors the USD the foremost and attempts to peg the currency thereto. The NGN isn’t pegged to other currencies, therefore the rate could vary daily. Assume the AUD/NGN rate is 245.30. meaning it costs 245.30 NGN to shop for one Australian dollar.

To see what the rate of exchange is in terms of NGN/AUD, divide one by the AUD/NGN rate, or 1 ÷ 245.30 = 0.004. meaning it costs but half a cent AUD to shop for one NGN.

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