How The Rising Naira-Dollar Exchange Rate affects Nigerian Online Vendors

How The Rising Naira-Dollar Exchange Rate affects Nigerian Online Vendors

As of October 2021, the exchange rate of the Nigerian Naira to the US Dollar is a whopping ₦600. Early in January 2021, the exchange rate was about ₦400 to a Dollar. Ever since then, the rates keep rising. If the rising rates did not affect the economy and price of commodities, Nigerians will probably not worry about it. But the unfortunate thing is, the rising exchange rate is making a lot of services, products and commodities more expensive as the days go by.

In this article, we aim to analyse how the rising Dollar-Naira exchange rate affects online vendors in Nigeria. Online vendors are people that sell goods and products via the internet. If you are an online vendor, you might have your own website where your consumers order your products. You night sell exclusively on social media platforms like Instagram and WhatsApp. You might also have your products listed on online marketplaces like NairaEngine, Jiji, Jumia, Konga and others. Online vendors generally don't have a physical store or shop where they interact with customers in person. Rather, most of the purchase interaction is done over the internet. So, how does the increased exchange rate between the Nigerian Naira and the US Dollar affect Nigerian online traders? We present to you below, a number of them.


1.  Price Surge makes it difficult for vendors to replenish their stock

As an online vendor, you definitely have bought all the products you advertise that you have into stock. So, you have these products presently waiting in store for purchase. When there is a price surge, you need to add more money to buy the same products you bought in the past at a certain less price.

Let's say, you bought 12 cartons of spaghetti at ₦5000 and you made a profit of ₦500 from selling each carton. Then you get to the market to restock after selling everything and you're shocked to hear that the new price of 12 cartons of spaghetti is no longer ₦5000 but now ₦7000.

What this means is that you have already budgeted a particular amount to restocking your spaghetti online shelf and now, your money is not enough to buy the same things it bought as of two months ago. Stock replenishing will be harder to do for many online vendors as they now have to budget higher amounts to buy products.

2.  Price Surge affects customer patronage due to increased price of goods

Now, imagine the amount of shock that customers will get when they see that products listed on your website are 30% higher than when they bought them the last time. Many customers will choose to not buy that product anymore from your online shop since it's now more costly.

What most customers will do, is to check with other online vendors to compare prices. If they find another vendor that offers a lower price than yours for the same product, then they will buy from that vendor. This price inflation and surge due to rising exchange rates is not in the best interest of online vendors at all. Because customer patronage will reduce and so will profits. 

3.  Business capital now insufficient

For those new to the online trading world and who want to launch their online business selling products, it is now harder than ever. The same amount of capital used to purchase products and start an online business in early 2020 is now very insufficient to start a business less than two years later. This means that the exchange rate has crippled the rise and growth of SMEs. Online vendors make up a huge part of Small and Medium Scale Enterprises in Nigeria currently. And with the hiked cost of things, the average amount of capital used to start an online business in the past is no longer sufficient.


4.  Decreased purchasing power of the Naira and increased poverty rates mean less customer base.

With the increased difficulty to make ends meet in Nigeria, a lot of people will be sliding down the poverty line. Due to the huge rate at which the Naira is been devalued, lots of Nigerians find that they can buy very little with huge amounts of Naira. More businesses are shutting down and finding it hard to cope. This means that lots of people are struggling and might not have enough spare money to purchase products from an online vendor or even buy an internet subscription. This means that online vendors will also sell less and make fewer profits.



Although, there are other ways that the rising exchange rates affect online vendors, the four points mentioned above are the main ways through which online vendors are affected. As an online vendor, you might have to take protective measures to ensure that your online business keeps thriving despite these uncertain and tough times.