Economy
The Currency Risk for Nigerian Businesses is Very Real – What Are the Best Ways to Handle It?
There is always some risk even in the most surefire business ideas – after all, nothing ventured, nothing gained right?
But businesses that operate by using different currencies for buying and selling, face uniquely pertinent risks from changes in the volatile currency markets – especially when dealing with a marginal currency like the Nigerian Naira.
In this post, we will take a close look at just what these risks are and how Nigerian businesses can best guard against them.
Despite experiencing some hardships since the oil crash of 2014, Nigeria is Africa’s largest economy by some distance and in many ways, it could be viewed as an African success story. The Lagos business districts are growing fast as young, entrepreneurial Nigerians form startups at a truly impressive rate, and ever more international businesses are now taking note.
As Nigeria begins to look outwardly across the continent and the globe, more and more domestic businesses find themselves transacting internationally either in buying or selling goods, or ordering or providing services.
Whilst doing business with the world offers huge opportunities, the challenges that come with transacting across borders in different currencies can be very intimidating for any business that relies on a currency as peripheral, and volatile as the Naira.
The Certainty of Change
Indeed, businesses that deal with clients or suppliers in other countries generally need the currency exchange rates to be very stable – fluctuations affect a transaction’s cost-effectiveness and can make all the difference between profit and loss.
For example, a Nigerian fashion house might buy its fabric from Senegal and then sell its finished goods domestically. If the Naira drops against the CEFA though, then the cost of importing fabrics will go up.
Whilst the firm can try to pass the difference and increase in costs onto the customers by charging more for the end product, many customers are more likely to find the goods to be overpriced. This can be disastrous for companies who are locked into contracts or simply rely heavily on a particular supplier as they can be pushed into running their once profitable business at a loss.
Businesses in the western world also face this dilemma too but currencies like the USD, EUR and GBP are generally pretty stable. As such whilst fluctuations can certainly hurt business, they are more often than not, possible to absorb.
However the Nigerian Naira has endured something of a torrid ride over the last 5 years; in 2017, $1 USD = N315 whereas the rate is currently $1 = N414! Trying to establish a medium to long term strategy for an international basis is very difficult when that business is built on a shaky foundation such as the Nigerian Naira.
The situation gets even more complex. Once again western business enjoys an advantage in the business foreign exchange field – there is a whole range of ways in which western businesses can guard against fluctuations in the currency markets that are unavailable to Nigerian business.
In particular, UK businesses enjoy a wide selection of Foreign Exchange possibilities on account of its gold-standard credit rating, libertarian financial services climate and highly trusted regulatory framework.
On the other hand, a lot of these ways are simply not available in Nigeria as a lot of the requisite service providers are either unwilling or unable to offer business in the country.
This is mostly owing to perceived currency and political stability issues mixed with an unfortunate reputation of Nigeria as an incubator of financial crime. Whilst Nigeria is not currently suffering from any US-imposed financial sanctions, it is feared that a change of regime could lead to this happening.
How to Hedge FX as an SME
There are 3 very common methods of currency hedging – ways in which businesses can indemnify themselves against changes in the currency market.
- Forward Contracts
Forward contracts are when a business agrees to buy a set amount of a given currency, over a specified time, at an agreed, settled rate. For example, a Nigerian business may anticipate that it will need to buy $10,000 over the coming year to pay suppliers. Rather than buy it incrementally as and when it is needed, a forward contract would allow them to “lock-in” the current exchange rate allowing them to budget the N4,111,600.00 they will need.
Forward contracts serve to protect a business from a drop in the value of their currency, but on the other hand, if the Naira was to increase against the dollar then the business would be losing out and paying more for the dollars. Forward contracts can be a bit of a gamble but they do provide certainty.
Problematically though, most of the companies dealing in forward contracts are not offering their services to clients in Nigeria. However, in September 2021, Nigeria did agree to a record $18 billion in OTC forward contracts so the outlook is at least improving.
- Currency Brokers & International Payment Providers
If a business is buying large amounts of a given currency, then a currency broker may be able to help them get a better exchange rate than the one generally available on the market. The issue Nigerian businesses face here though is simply that many currency brokers have a low appetite for buying Naira if they will deal with Nigerian business at all.
When making sizable international business payments (such as for an invoice) then an international transfer service provider can help a business save fees on international bank payments and may also be able to help them ensure a better rate. Unfortunately, though, international business payment service providers don’t accept any Nigerian business.
- Multi-Currency Accounts
Another very useful way for FX hedging is to open a multi-currency account. Multi-currency accounts allow a business to hold account balances in different currencies via sub-accounts or ‘pots’ in addition to their main balance. A Nigerian business could hold its main balance in Naira but then have a USD pot and a CEFA pot. The advantage is that they have foreign currency ready to use and are once again protected by the ebb and flows of the Naira.
Multi-currency accounts are very useful for companies that regularly deal in a small number of particular currencies.
Once again though, a lot of the international or borderless banks that offer multi-currency accounts don’t allow balances to be held in Naira and relatively few Nigerian banks allow multi-currency balances at all.
So, as we can see, all across the world, small businesses have dedicated service providers who are able to assist with FX management and payment. However, in Nigeria few, if any of these options are available.
How To DIY Hedge Against Currency Fluctuations
In the absence of a supportive financial service sector, Nigerian business owners have to utilise their talent for resourcefulness and look for ‘DIY’ hacks for currency hedging.
- Buy Cash Currency
Without access to either brokers or multi-currency accounts, Nigerian businesses are largely unable to hold balances in foreign currencies. They can, however, still hold cash in whatever currency they can get their hands on. Currencies like the USD, Euro and GBP are available worldwide and the CEFA can be obtained in many Nigerian money exchanges or by hopping over the border.
Therefore, when the exchange rate moves to a favourable position (i.e. the Naira becomes strong against the USD), a Nigerian business person can simply take advantage, buy USD cash and lock it securely away until it is needed. They can use it to make international payments via services such as Western Union or Ria or can simply sell it back when the rate changes in the other direction.
- Borderless Bank Accounts
There are an increasing number of fintech startups offering “borderless bank accounts” to residents of an increasing number of countries. These offer Nigerians an opportunity to get an international bank account in a foreign currency via the backdoor. However, few of them permit Nigerian citizens to hold accounts. Even Wise has stopped servicing Nigerian customers at least for now.
- Paypal
Whilst its fees and exchange rates are not the best, Paypal does allow Nigerians to hold accounts and will also permit them to hold USD balances if they receive funds in USD.
- Cryptocurrency
The cryptocurrency market is something of a wild frontier and as such, many platforms will accept customers from all over the world including Nigeria. Therefore a business could buy a given cryptocurrency and then hold it in their crypto-exchange until it was needed.
Whilst critics may point out that most cryptocurrencies are far more volatile than even the Naira, there are stable coins like the USDT which tracks the USD rate 1 for 1. Therefore, in buying USDT, a Nigerian business can almost hold a USD balance which can be converted back to fiat when they need to use it.
In Summary
From Lagos to London, international trade is both exciting and complex. However, Nigeria and the developing world, in general, do face some extra difficulties.
Still, whilst these difficulties can be restrictive they can be overcome or at least countenanced with some determination and ingenuity – and both of these are traits that Nigeria holds in abundance.
By Adedapo Adesanya
Despite signs that Nigeria’s headline inflation is easing, rising food prices continue to threaten the country’s inflation outlook, the chief executive of the Centre for the Promotion of Private Enterprise (CPPE), Mr Muda Yusuf, has warned.
He noted that structural inflationary pressures in the real economy remain pronounced despite improving macroeconomic stability.
In a policy brief released following the inflation report, he noted that headline inflation eased marginally, while month-on-month change moderated from 1.75 per cent to 1.66 per cent, indicating that headline inflation has largely plateaued.
According to him, the dominant concern in the latest inflation report is the renewed acceleration in food inflation.
This growth, he said, suggested that food prices have resumed an upward trajectory after a brief period of moderation.
Warning that a renewed increase in food inflation has significant economic and social implications, he stressed that food inflation remained the biggest driver of Nigeria’s cost-of-living crisis, stressing that rising food prices continue to erode household purchasing power, worsen poverty and food insecurity while weakening the inclusiveness of the current reform programme.
He maintained that sustained moderation in food prices is critical to improving citizens’ welfare and strengthening public confidence in the ongoing economic reforms.
Acknowledging the easing of core inflation as encouraging, he drew attention to the persistence of urban inflation.
At 16.08 per cent, urban inflation exceeded the national headline inflation rate of 15.91 per cent, while month-on-month urban inflation increased from 1.99 per cent to 2.13 per cent.
According to Mr Yusuf, the figures indicated that inflationary pressures remained particularly intense across urban centres.
He attributed the rising urban inflation partly to increasing population displacement from rural communities affected by insecurity, expressing worry that as more households migrate to urban areas, demand for housing, transportation, utilities and other essential services would increase, adding to inflationary pressures and creating additional urbanisation challenges.
Addressing insecurity in farming communities, he said, was important not only for protecting lives and property and boosting agricultural output but also for easing cost pressures in urban centres, adding that the June CPI data reinforced the view that Nigeria’s inflation challenge is predominantly structural rather than monetary.
On the monetary policy outlook, he said the data do not justify further monetary tightening, arguing that headline inflation has largely stabilised.
The CPPE chief expected the Monetary Policy Committee (MPC) to retain the current monetary policy rate at its next meeting, adding that the priority is for monetary and fiscal authorities to work together to accelerate structural reforms to expand food supply, improve logistics, reduce energy and production costs, lower debt service costs, as well as strengthen domestic value chains.
By Aduragbemi Omiyale
Additional shares of Sterling Financial Holdings Company Plc have been listed on the Nigerian Exchange (NGX) Limited.
The new equities were added to the company’s existing stocks on Customs Street on Thursday, July 16, 2026, a notice from the bourse confirmed.
Business Post reports the total new ordinary shares of Sterling Holdings listed yesterday were 13,812,239,000 units.
They were from the offer for subscription of 12,581,000,000 ordinary shares of 50 Kobo each sold for N7.00 per share, which was oversubscribed by investors.
The financial institution brought the new shares to the stock exchange to increase its total issued and fully paid-up shares to 65,929,251,414 ordinary shares of 50 Kobo each from 52,117,012,414 ordinary shares of 50 Kobo each.
“Trading licence holders are hereby notified that an additional 13,812,239,000 ordinary shares of 50 Kobo each of Sterling Financial Holdings Company Plc were on Thursday, July 16, 2026, listed on the daily official list of Nigerian Exchange Limited.
“The additional shares listed on NGX arose from the company’s offer for subscription of 12,581,000,000 ordinary shares of 50 Kobo each at N7.00 per share.
“With the listing of the additional shares, the total issued and fully paid-up shares of Sterling Financial Holdings Company Plc have now increased from 52,117,012,414 to 65,929,251,414 ordinary shares of 50 Kobo each,” the notice read.
By Adedapo Adesanya
President Bola Tinubu has signed a Presidential Executive Order on Virtual Assets Coordination, establishing a new framework to coordinate the regulation of virtual assets across government agencies as Nigeria seeks to curb fraud while supporting innovation in the digital economy.
The Executive Order, which takes immediate effect, creates a Virtual Asset Council chaired by the Central Bank of Nigeria (CBN) to harmonise oversight of cryptocurrencies, tokenised assets, stablecoins, and other digital assets without creating a new regulator.
As part of the new framework, the CBN will establish a regulatory sandbox that will allow eligible firms to test virtual asset products, blockchain solutions, and related services under regulatory supervision before they are introduced to the wider market.
The development was disclosed in a statement issued on Friday by the President’s Special Adviser on Information and Strategy, Mr Bayo Onanuga.
According to the presidency, the Executive Order responds to the growing complexity of virtual assets, which increasingly cut across the traditional boundaries of currencies, securities, commodities, and payment systems.
The fragmented regulatory environment has left gaps that have exposed Nigeria to money laundering, terrorism financing, cybersecurity and data privacy risks, fraud, and revenue losses.
The government said some unregistered operators have exploited these regulatory gaps to defraud unsuspecting Nigerians, resulting in significant financial losses.
“The Order is designed to close these gaps through supervisory coordination, without introducing new layers of regulation or displacing the mandates of existing agencies,” the statement read.
Under the new framework, the Virtual Asset Council will be chaired by the CBN, with the Nigeria Revenue Service (NRS) and the Securities and Exchange Commission (SEC) serving as vice chairs. Other members include the Nigerian Financial Intelligence Unit (NFIU) and the Office of the National Security Adviser (ONSA).
The Council will provide policy direction, improve cooperation among participating agencies, and work with the Attorney General of the Federation to develop a harmonised legal and institutional framework for the sector.
The Executive Order also establishes a Virtual Asset Office, which will serve as the Council’s operational arm. The office will be domiciled at the CBN and will coordinate information sharing, applications, and reporting among the participating agencies through a shared supervisory technology platform.
The presidency stressed that the Executive Order does not create a new regulator or transfer statutory powers from existing agencies, clarifying that instead, each institution will continue to exercise its existing mandate while working within a coordinated framework.
Under the arrangement, registration of virtual asset businesses will depend on the nature of the service being offered.
Activities classified as securities will continue to be regulated by the SEC, while payment, settlement, custody, and other services involving non-security virtual assets will fall under the CBN.
Where there is uncertainty over regulatory jurisdiction, the Virtual Asset Council will determine the appropriate supervising agency.
“The sandbox will provide a controlled environment in which eligible operators can test and operate virtual asset products, services, and blockchain-based solutions under close supervision, enabling the participating agencies to assess the implications for monetary sovereignty, financial stability, market integrity, consumer protection, financial inclusion, and revenue administration before products reach the wider market,” the statement added.
According to the presidency, the sandbox will enable regulators to evaluate the implications of emerging products for financial stability, monetary sovereignty, consumer protection, financial inclusion, market integrity, and revenue administration.
The central bank is expected to announce further details of the sandbox.
