real value
Real value is what your money can actually buy after inflation has taken its bite, more than the number printed on the note.
In plain English
Two women each got ₦50,000 in January. One kept hers under the mattress. The other put hers in a fixed deposit that paid ₦2,500 in interest by December. By December, both of them went to the same market and found that garri, rice and beans now cost about 15% more than they did in January.
The mattress woman still had ₦50,000 in her hand, and it felt like nothing had changed. The fixed deposit woman had ₦52,500, and it felt like she had won something. But if you check what each amount could actually buy at the new prices, both of them lost ground. The number went up for one and stayed flat for the other, yet real value fell for both, because prices moved faster than their money did.
That is the whole trick behind real value. It strips away the noise of rising prices and asks one honest question: can this money buy more, the same, or less than it used to? A salary that moves from ₦300,000 to ₦330,000 sounds like progress, a 10% raise. But if the cost of living in Lagos has climbed by 20% in that same year, the raise is really a pay cut in disguise. The naira figure went up. The real value went down.
In the UK, this is why workers talk about wages failing to keep up with inflation, even when their payslip shows a bigger number every year. A pound today does not stretch as far as a pound did five years ago, and nobody feels rich just because the figure on the screen is larger.
For someone abroad sending ₦200,000 home every month, real value matters even more. The sterling or dollar exchanged might buy the same amount of naira today as it did last year, but if prices in Nigeria have risen sharply, that same ₦200,000 calmly buys less rice, less school fees, less relief for the family receiving it.
Suppose your salary rose from ₦400,000 to ₦440,000, a 10% increase. If inflation over the same period was 22%, the real value of your new salary is actually lower than your old salary was a year ago, even though the number on your payslip grew.
Questions people ask
What is the difference between real value and nominal value?
Nominal value is the plain figure you see, like ₦50,000 in your account. Real value adjusts that figure for inflation, showing what it can actually buy compared to an earlier point in time. Nominal tells you the number, real tells you the truth.
How do I calculate the real value of my money?
Divide the nominal amount by a price index for the period, or compare how much of a fixed basket of goods it could buy then versus now. Simply put, track how much rice, transport or rent has changed, and measure your money against that, not against the calendar.
Why does my salary increase never feel like enough?
Because raises are usually nominal, decided in naira terms, while your cost of living moves with inflation, which is often faster. If your pay rose by 8% but prices rose by 18%, you are working just as hard yet falling behind, and that gap is exactly what real value measures.
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