The Naira/Dollar Stability Illusion

The official rate has been hovering around the ₦1,360 range, while the street market has remained around the ₦1,400s. The CBN has also kept its policy rate at a very high 26.5% as it tries to keep inflation and currency pressures under control.

On paper, this looks like good news.

But ask the average Nigerian and the response may be different.

“Dollar don calm down, so why is rice still expensive?”

That's where the stability illusion comes in.

A stable naira means the exchange rate is no longer moving as violently. It does not mean the prices that went up during the naira's earlier fall will automatically come back down.

Nigeria's inflation rate was still 15.91% in June 2026, while food inflation was higher at 17.52%. So even with a more stable exchange rate, prices are still increasing. They're just increasing more slowly than before.

Think about it this way.

If a bag of rice moved from ₦30,000 to ₦70,000 because of higher import, transport and operating costs, a stable dollar does not magically take it back to ₦30,000.

The seller still has to deal with today's transport costs, rent, labour, electricity, financing and other expenses.

This is what economists call sticky prices.

Prices tend to go up quickly when costs rise, but they don't always come down at the same speed when those costs fall.

You've probably seen this with fuel.

When petrol prices rise, transport fares and the cost of moving goods can change almost immediately. But when petrol prices eventually fall, the reduction may take weeks or months to show up across the economy.

Part of the reason is simple: businesses may still be selling products bought at older, higher prices. Others are cautious because they don't know whether the cheaper costs will last.

And nobody wants to reduce their price today only to discover that their replacement stock will cost more tomorrow.

So yes, fuel prices can fall and the naira can stabilise while your favourite food seller still hasn't reduced prices.

That's frustrating, but it isn't necessarily proof that the exchange-rate improvement is fake.

There is another problem.

Nigeria still has very high borrowing costs. The CBN's Monetary Policy Rate remains at 26.5%, which makes loans expensive for businesses trying to expand, buy equipment or increase production.

That matters because cheaper dollars alone cannot fix an economy where producing locally is still expensive.

A manufacturer needs electricity.

A farmer needs transport.

A retailer needs working capital.

A business importing machinery needs access to foreign exchange.

If those costs remain high, prices can remain high even when the naira is more stable.

And there's another reason to be careful about celebrating the stability too early.

Some of the improved dollar liquidity has been supported by stronger capital inflows and investor interest. Nigeria's capital inflows have reached a six-year high, but much of the recent enthusiasm is happening in financial markets rather than in the pockets of ordinary Nigerians.

That distinction matters.

A foreign investor buying Nigerian government securities can bring dollars into the country and help support the naira. That's useful.

But it is different from having more factories producing goods, more farms increasing output, more businesses exporting products, and more Nigerians earning foreign exchange from productive activity.

That's the real test of stability.

Can Nigeria keep the naira relatively stable while increasing local production, bringing down inflation, making credit cheaper and improving people's purchasing power?

Because Nigerians don't spend dollars every morning.

They spend naira.

And if the dollar is stable but ₦10,000 still buys less food than it used to, the average Nigerian will not feel much of that stability.

The naira may finally be getting some breathing room.

The bigger question is whether that breathing room will eventually reach the market, the business owner and the Nigerian household.