In Nigeria, it can be hard to know just how much the notes in your wallet are worth.
The official exchange rate for the country’s currency, the naira, is around 305 to the dollar. But banks lend to each other at a second rate. A third rate is used by international money transfer companies. Perhaps the most important rate is the one found on the black market (currently 380).
The result is currency confusion: The central bank even maintains separate rates for religious pilgrims who need dollars for trips to Mecca, Rome or Jerusalem.
The naira faces problems that extend far beyond the trouble caused by multiple rates, however.
Here’s a look at the struggling currency:
Oil money
Collapsing oil prices have heaped pressure on the naira.
The country’s central bank maintained a peg of roughly 200 against the dollar until June of last year. But then, as dollar reserves ran dry, the government changed tack and devalued the currency. The naira immediately plunged 30%.
Since then, the central bank has intervened to keep the currency’s official rate from depreciating further.
Speculation runs wild on the black market, however. The naira hit a record low against the dollar of around 520 earlier this year, according to Abdullahi Abdulakeem Abdullahi, CEO of currency trading company Abu Ya’asir International.
The exchange rate has since rebounded along with the price of crude.
Dollar shortage
Nigeria is suffering from a major shortage of dollars.
Why are dollars needed? Nigeria exports plenty of oil, but it relies on shipments from abroad to source basic household items and food.
Nigerian importers need to pay these foreign companies in their home currencies. But dollars and euros are in short supply.
That’s because anyone with foreign currency is trying to hold onto it — a bet that rates will improve in the future.
Most everyone else is forced to rely on the black market.
Tourists, for example, will find their hotels eager to exchange dollars for naira. But want to switch excess funds back into dollars at checkout? No chance.
“If you walk into a bank to exchange dollars or buy dollars you need to ask for the bank manager. That’s why people go to the black market, it’s easier,” said Abdullahi.
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Reserves spent
Crude sales account for up to 70% of government revenue and more than 90% of the country’s export earnings.
Oil is also the source of most of the country’s foreign exchange reserves.
Before the crash in oil prices, Nigeria had nearly $43 billion in reserves. By June 2016, efforts by the central bank to support the naira had pushed the figure below $27 billion.
The central bank said in mid-2016 that it would allow the naira to trade freely. But currency traders report the bank has continued to intervene in the market.
Let it float
Economists say the situation won’t be entirely remedied until the government removes currency controls and truly allows the naira to trade freely.
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The International Monetary Fund, in its latest report on Nigeria, recommended the government “remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence.”
Abdullahi would welcome change. He describes the current system of multiple exchange rates as simply “crazy.”
–CNN