On June 14, 2023, Nigeria officially floated the naira; in other words, the value of the naira is determined by the market forces (demand and supply). However, since then, the naira has been fighting for its life, and we have seen a depreciation of its value and fluctuations in exchange rates.

In this post, we’ll look at some effects these fluctuations have had on Nigerian freelancers and give some tips on how to cushion these effects. But firstly, what are some of the reasons behind the volatile exchange rates in Nigeria?

Causes of Exchange Rate Fluctuations in Nigeria

1. Inadequate dollar supply: a recent Bloomberg report revealed that there is a severe shortage of dollars in Nigeria right now, which is causing the naira to lose value. How? Because there’s more demand for dollars than the government can supply, businesses and individuals are willing to pay more on the parallel (unofficial) market.
2. The government, however, stated that there will be more dollar inflow in the coming weeks to increase its supply and stabilize the naira.
3. Inflation: Nigeria’s inflation crisis has been a significant cause of the naira’s depreciation, with our current inflation rate at 26.72%. An inflation rate reduces the demand for Nigerian exports and increases the demand for imports. This inevitably results in more demand for foreign currencies, weakening the naira.

As expected, the recent fluctuations in the exchange rate have caused the cost of living and manufacturing costs to rise; international students are not excluded, as they have to deal with higher tuition fees and living expenses.

Freelancers and remote workers who work for international brands are also affected; we spoke with some of them, and they shared their thoughts on the situation.

What Nigerian freelancers are saying:

One of the impacts of the fluctuating exchange rates is that some freelancers who agreed to be paid in dollars lose money when converting their earnings to naira. This is a situation Bisola, a freelance product designer, can relate to. She recently negotiated a project and payment when the exchange rate was ₦1100/$, but now the dollar-to-naira rate fluctuates between ₦900 and ₦950/$. The naira is expected to continue to gain in the coming weeks, which consequently means that when Bisola converts her earnings, she’ll receive less than she’d have if the naira were stable.

The volatility of the exchange rate makes it difficult for freelancers to predict precisely how much they’ll earn for their work, which can lead them to raise their prices to cushion against unexpected differences in the exchange rates. And doing this might make them less competitive in the global marketplace.

To manage the ongoing fluctuations in the exchange rates, Feyi, who’s a remote product designer, keeps most of her money in USD to avoid loss and only converts to naira when the exchange market appears to be stable or when she needs naira. She also shares that due to the economic state, especially with the high cost of living, she prefers international clients who can be charged in USD.

However, on the other hand, Zainab, a content editor, has taken advantage of the volatile exchange rate to increase her earnings. But she realizes that it isn’t sustainable because despite earning in dollars, she spends naira, and as Feyi mentioned, there’s an increase in the cost of living.

Tips to Manage the Effects of the Exchange Rate Fluctuations as a Freelancer

• Diversify your income: By diversifying your clients and portfolio, you can earn in more than one stable currency. This way, your earnings will be more resilient to exchange rate fluctuations.
• Open a foreign bank account: with a foreign bank account, you can receive payments directly in foreign currency and save money on conversion fees. Also, you can get more competitive exchange rates than you would with a Nigerian bank. You can open a free virtual EUR, GBP, and USD account with Grey here.
• Invoice in foreign currency: this helps freelancers get paid more consistently, even if the exchange rate changes or the naira depreciates. Learn how to send invoices to clients in your currency choice on Grey.