Nigeria’s Little Problem: Lying Statistics

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.


Nigeria’s currency (the naira) has been officially pegged in a range of 197-199 NGN/USD for nearly a year. But, that’s a phony government rate. As shown in the accompanying chart, the black market (read: free market) rate has exploded since October, and currently stands at 350 NGN/USD.

And that’s not all. Last week, the Central Bank of Nigeria reported an annual inflation rate of 9.62% for January 2016. The real annual inflation rate was over six times higher. Talk about lying statistics.

The most reliable method for calculating inflation in countries experiencing elevated rates of inflation is to utilize changes in the black market exchange rate data. Application of the Purchasing Power Parity theory (PPP) then allows us to calculate implied inflation rates. At high levels of inflation, this method is extraordinarily accurate. The real tale of Nigeria’s inflation problem is contained in the accompanying chart. Nigeria’s implied annual inflation rate exceeds 60%.