nominal
Nominal means the raw, unadjusted figure, a value stated in today's money before you strip out inflation to see what it can truly buy.
In plain English
Why did your salary go up but somehow you can afford less than you could three years ago? That question is really about the difference between nominal and real, and once it clicks, a lot of confusing money talk starts to make sense.
Nominal is simply the number on the page. If your salary moved from ₦150,000 to ₦200,000, that ₦200,000 is your nominal salary. It is the figure printed on your payslip, the one your bank account shows, the one you quote when someone asks how much you earn.
But that number does not tell you what your money can actually do. If prices for rice, transport and rent rose faster than your pay increase, your nominal salary went up while your real buying power calmly went down. Nominal ignores inflation completely, it just states the raw amount.
This matters a lot for Nigerians, because inflation has been high and stubborn for years. A trader in Onitsha whose sales revenue doubled in nominal terms might have made no real progress at all if costs and prices doubled too. Someone in the diaspora sending £200 home every month is sending the same nominal amount, but its real value in naira terms shifts depending on the exchange rate and local inflation on the receiving end.
Economists use nominal figures as a starting point, then adjust for inflation to get the real figure, which shows true growth or true loss. Interest rates work the same way. A savings account offering a nominal 10% return sounds fine until you realise inflation is running at 20%, meaning your money is actually losing value even as the account balance grows.
You earned ₦500,000 nominal salary last year and ₦600,000 this year. That looks like a 20% rise. But if inflation was 25% over the same period, your real income actually fell, because prices grew faster than your pay did.
Questions people ask
Is nominal the same as gross?
No. Gross usually means before deductions like tax, while nominal means before adjusting for inflation. A figure can be both gross and nominal at once, they are answering different questions.
Why do banks quote nominal interest rates instead of real ones?
Nominal rates are simpler to state and legally required in many disclosures. It is left to you to check inflation separately and work out whether the real return is actually worth having.
How do I turn a nominal figure into a real one?
Roughly, subtract the inflation rate from the nominal rate or growth figure. If your nominal pay rise is 15% and inflation is 20%, your real change is about negative 5%, meaning you are worse off in real terms.
Last reviewed