How to Price Your Products in an Unstable Economy

The dollar goes up. Naira falls. Your supplier sends a new invoice with a "rate adjustment" you never agreed to. Diesel that cost ₦400 per litre years ago is now well above ₦1,000. And your customer, who is also feeling all of this, looks at your new price and says you're too expensive.

This is the reality of running a business in Nigeria right now. Pricing has never been a one-time decision, but in this economy, it feels less like a business task and more like a daily negotiation with forces outside your control.

The problem isn't greed on either side of the counter; it's that macroeconomic instability has made a fundamentally simple transaction genuinely complicated. If you're a business owner trying to stay profitable, here’s how to price smartly when nothing stays the same.

1. Understand Why Your Old Price No Longer Works

Most small business owners set a price, get comfortable with it, and only change it when they’re already losing money. That’s a reactive strategy, and in a volatile economy, it is dangerous.

Nigeria’s inflation rate has been running in double digits, the naira has depreciated significantly against major currencies, and imported raw materials (which many businesses depend on) have become dramatically more expensive. If your cost structure has changed but your price hasn’t, you’re silently absorbing losses every single day.

The first step is simple but painful: Recalculate your actual cost of goods right now, not what it was six months ago. You may be shocked.

2. Know Your True Cost. All of It

Many business owners only count the obvious costs, materials, and maybe rent. But your true cost includes much more, and underestimating it is where margins quietly die.

TRUE COST = Raw materials + Labour + Rent + Utilities (electricity, diesel, water) + Transport/logistics + Packaging + Platform or transaction fees + Time (your own labour has a cost) + A small buffer for the unexpected.

That last item matters especially in Nigeria. Generator fuel prices, Naira depreciation between the time you ordered stock and the time you sell it, customs delays, these aren’t rare events; they’re regular operating conditions. Your cost structure must account for them.

3. The Three Pricing Strategies That Actually Work Here

There’s no one-size-fits-all pricing formula, but these three approaches are particularly relevant for Nigerian market conditions:

- Cost-Plus Pricing: Calculate your true cost per unit, then add your desired profit margin on top. Easy to use and simple to modify as the prices change. This range varies from 20% to 40%, based on the type of business; however, it is important for you to understand that your mark-up should be based on your position in the market.

- Value-Based Pricing: Set your prices based on the value of the product rather than the cost involved in its production. You could charge more for the product if it saves time or solves problems for your customers.

- Competitive Pricing: Find out what others are charging for their products and set prices with the others in mind. Never price below your cost just to match a competitor. That’s a race to zero.

In practice, most successful Nigerian SMEs use a combination: start with cost-plus to set your floor, check your competitors to understand the ceiling, then price based on value to find the sweet spot.

4. Build a “Volatility Buffer” Into Every Price

This is the part most people skip, and the part that keeps businesses alive during economic shocks.

A volatility buffer is an additional margin you embed in your price specifically to absorb unexpected cost increases before they force an emergency price hike. Think of it as a shock absorber.

This buffer also gives you room to run occasional promotions or absorb a slow month without going into the red. Pricing with a buffer doesn’t mean being greedy; it means being sustainable.

Don’t wait until your margin is gone to raise your price. By then, you’re already behind.

SUGGESTED BUFFER

If your costs are heavily import-dependent or Naira-denominated, add a 10–15% buffer on top of your standard margin. For locally sourced goods with stable input costs, 5–8% is typically sufficient.

5. Communicate Price Changes Without Losing Customers

Here’s the part business owners fear most: telling customers the price went up. But done well, it doesn’t have to cost you loyalty.

• Be honest. “Due to increases in raw material costs and the exchange rate, we’ve adjusted our prices”, lands much better than a mysterious new price with no explanation. Nigerians understand the economy; they’re living it too.
• Give notice where possible.  If you have loyal customers, a heads-up message before the price changes builds goodwill and gives them time to stock up if they want to.
• Reinforce your value. This is a good time to remind customers of the reasons your product justifies the price hike: quality, freshness, service, and reliability.
• Offer smaller pack sizes rather than dramatically hiking prices.  Instead of doubling the price of a 1kg bag, introduce a 500g option at an accessible price point. Customers feel they have a choice; your margin stays intact.

6. Offer Discounts Smartly, Not Desperately

Discounts can bring customers in, but handled badly, they'll quietly destroy your brand. If people learn that your prices always drop eventually, they'll stop buying at full price. They'll wait for you. And in a tight-margin environment, you can't afford that game.

The goal isn't to discount, it is to discount with intention. Instead of random price cuts, try approaches that reward without devaluing:

• Reward loyal customers with exclusive deals they actually feel special about.
• Bundle products together so the perceived value goes up, even if your margin stays protected.
• Run limited-time promotions with a genuine end date; scarcity works.
• Offer value-added bonuses instead of slashing the price itself.

That last point is underrated in the Nigerian market. A small gift, an extra unit, faster turnaround, these can feel more generous to a customer than a ₦1,000 price reduction, while costing you less overall.

Protect your full price. That number represents your costs, your labour, and your worth.

7. Review Your Prices Regularly. Not Just in a Crisis

Pricing is not a set-and-forget decision. In a stable economy, a quarterly review makes sense. In Nigeria right now, a monthly review is better.

Build a simple spreadsheet that tracks your key input costs (materials, diesel, rent, transport) and flags when they have moved beyond a certain threshold. When the numbers say it’s time to adjust, adjust, don’t wait for your bank account to tell you.

PRICING REVIEW CHECKLIST

• Recalculate the cost per unit with the latest prices.
• Check what competitors are charging.
• Confirm your margin is above your volatility buffer.
• Communicate any changes clearly to your customers

What Consumers Should Know

If you’re on the buying side of this equation, here’s what’s worth understanding: for most legitimate companies in this context, price hikes are not an act of greed, but rather one of necessity. The company that does not raise prices to cover higher expenses ends up going out of business. And if small companies are forced to shut down, jobs go with them.

This does not mean all price hikes are necessarily valid. For instance, exploitative pricing on necessities should definitely be avoided. However, being outraged by price hikes misses the larger issue.

Rather than being angry at price hikes, there should be more discussion about the underlying macroeconomic situation leading to such circumstances: high fuel prices, exchange rate volatility, infrastructure gaps, not just the business owner passing on their costs.

The Bottom Line

Pricing in an unstable economy is genuinely hard. It requires regular attention, honest accounting, and the courage to charge what your product is actually worth. Underpricing to win customers is a short-term trap; you’ll attract buyers but build nothing sustainable.

Know your costs. Build in a buffer. Communicate clearly. Review often.

That is how businesses survive and grow when everything around them is uncertain.

In a market this unpredictable, the businesses that win aren't the ones with the lowest prices; they're the ones who always know their numbers.