A trending WhatsApp post claims that depreciation of the naira against the dollar is not as bad as people think, arguing that the currency exchange rate is not a yardstick for the basic cost of living comparison.
Part of the lengthy post titled, ‘One Dollar ($1) VS Five Hundred (N740) BROUHAHA’ reads: “I came across people making a mockery of the naira vs the dollar in the last 48 hours and I have been laughing since then. Is the currency exchange rate a yardstick for the basic cost of living comparison? I am not happy that our naira is depreciating always but hey….it is not that bad and this is why.”
The author of the post also claimed, among other things, that N740 can buy two square meals in Nigeria while $1 cannot buy a meal in the United States.
Preliminary findings by Daily Trust revealed that the post was first made in a blog by, Engr. Ibrahim Danlami Aliyu, in October 2021 and recirculated recently. At the time, the author of the blog used N500 as the exchange rate to a dollar as against the N740 used in the trending post.
The post read in part, “N500 can buy me a 1.6gb worth of data in Nigeria but $1 can’t buy you a 250mb of data in the US. T-Mobile charges N32,500 for a 30gb of data, AT&T charges N37,500 for a 30gb of data, Verizon also charges N40,000 for same 30gb of data in the US. Glo charges me N10,000 for 50gb and MTN charges me N10,000 for 40gb of data.
“A 75cl bottle of water in Nigeria cost an average N100, a 55cl bottle water in the US is $1.45 which is N725. The most expensive place to live in Abuja is Aso Drive, a single room cost N400,000 per month, same room goes for N350,000 in Lekki all in Nigeria. Same room in Manhattan, New York City goes for N1.8 million per month.
“N500 can buy me a dudu osun bathing soap and a Vaseline for the harmattan season, $1 can’t do same in the US. N500 can buy me 3 litres of fuel in Nigeria, $1 can only buy you 1.3 litre of fuel in US. It cost an average N180 daily to earn a degree in Nigeria, it cost an average N1,650 a day to earn same in the US. Keep Insulting Yourself Thinking You Are Insulting Nigeria. Good (sic) bless Nigeria God bless our president.”
While some of the claims could not be independently verified as of the time of filing this report, Daily Trust however, verified a few.
Is fluctuation in exchange rate a yardstick for measuring the cost of living?
Foreign exchange is the means of payment for international transactions. It is made up of convertible currencies that are generally accepted for the settlement of international trade and other external obligations.
Foreign exchange rates in Nigeria has been a major topic for discussion in recent times, as the Central Bank of Nigeria (CBN) continues to strengthen the naira against the green bag.
When there are fluctuations in foreign exchange rates, various economic activities are usually affected such as the purchasing power, balance of payment, prices of goods and services, import structure, export earning, government revenue, external reserves among others.
This instability and continued depreciation of the naira in the foreign exchange market has resulted increased cost of production which in turn leads to cost push inflation. It has also made planning and projections difficult at both micro and macro levels of the economy. A number of small and medium scale enterprises have been strangled as a result of unfavourable naira/dollar exchange rate.
Providing insight on the claim, a financial economist, Prof. Leo Ukpong noted that if the exchange rate remains constant over time, the claim will be true.
He said, “If the exchange rate is N1,000 to a dollar, and nothing else, that doesn’t mean the cost of living in Nigeria, is high, it’s just what our exchange rate is. So if it’s less than N1,000 to a dollar in the next 10 years, the cost of living has not changed; say it started five years ago at N500 to a dollar and is still N500.”
However, Prof Ukpong maintained that a change or fluctuation of the exchange rate from one period to the other would definitely affect the basic cost of living of the populace.
“Let’s say it was N500 today and a month from today, it is N600 to a dollar, you are looking at the change. That is a yardstick. It is a proxy to measure the cost of living. It is the depreciation when it moves from N500 to N600 and from N600 to N700; that is the change, and it means your cost of living is depreciating,” he said.
Another economist, Prof. Sheriffdeen Tella, said the exchange rate is not a direct yardstick for measuring the cost of living. “It’s not. It is linked to cost of production which indirectly affects cost of living,” he said.
Prof. Leo while reacting to the claim said, “That is a bad comparison on the person’s part because we are not on the same pay scale. Let’s take for example, the minimum wage for an average factory worker in the US is somewhere about $50 to $60 per hour. In Nigeria, we don’t have that per hour”.
“If you go to a restaurant and buy a meal; let’s take a simple meal like the one they call burger. For MacDonald’s, it costs you about $11. That is almost five to 10 times the amount you buy a burger in Nigeria. You cannot compare it, that’s a wrong comparison unless you break it down in a relative wage.
“If you are making N50,000 a month in Nigeria, and you can use that to feed a family in one week, how much would you need for, say a family of three in the US? You will need like N200,000 in a week. The person is completely wrong. He has to make a relative comparison to make sense,” he added.
The high cost of living in Nigeria is evident in the persistent increase in the prices of food items. According to a market survey carried out by Saturday Tribune, a 30kg of palm oil which used to sell for N8,000 now sells for N24,000 while a 25kg of groundnut oil that used to sell for between N5,500 and N7,500 now sells for N28,000. For a 20kg bag of garri that used to sell for between N5,000 and N6,000, the price is now N14,000.
A carton of Croaker fish has increased from N18,000 to N40,000 while a carton of spaghetti is now N6,500 from N2,200. Subsequently, a plate of food that used to sell for between N250 and N300 now sells at an average price of N500 and N700, depending on the location.
While it is true that $1 cannot buy you a meal in the US, it should be noted that the standard of living in the US is high compared to Nigeria; so also is the average income in the US. Also buying two square meals with N740 in Nigeria is relative, depending on the choice of meal and where it is bought. The sum may hardly be enough for a square meal in some restaurants in city centres.