What Is the Real vs Nominal Exchange Rate Explained
16 October 2026 - Naira BriefingThe nominal exchange rate is the headline number — naira per dollar. The real exchange rate adjusts that for inflation, showing the naira’s true competitiveness. The gap between them explains a lot that the headline exchange rate hides.
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The difference
- Nominal — the quoted rate you see.
- Real — the nominal rate adjusted for price differences.
- Why it matters — high inflation can erode competitiveness even if the nominal rate holds.
Why it matters
If Nigerian inflation runs hot, the naira can be “overvalued” in real terms even at a stable nominal rate — hurting exporters. This links to inflation and purchasing power parity, and is part of reading the naira properly.
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