• Thursday, April 18, 2024
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BusinessDay

The economy is not great: Why Nigerians are in a rotten mood

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In recent times, Nigeria has been gripped by a pervasive sense of dissatisfaction and frustration, marked by what can only be described as a “rotten mood” among its citizens. This collective sentiment arises from the dire state of the economy, worsened by the relentless surge in prices of essential food items.

As these prices soar, the struggle intensifies for many Nigerians, pushing them further into the abyss of economic hardship.

According to a recent survey conducted by BusinessDay in major markets across Lagos, the prices of staple food items such as rice, beans, bread, spaghetti, noodles, and eggs have surged, exacerbating the financial strain on households and worsening the overall cost of living.

A comparative analysis conducted by BusinessDay further underscores the severity of the situation, revealing stark differences in prices compared to the previous year.

The surge in food prices is hitting Nigeria’s poorest families the hardest. With the cost of essential food items soaring, many vulnerable people are struggling to afford enough nutritious food. This situation could make food insecurity worse and deepen poverty, particularly given the World Bank’s report indicating that over 104 million Nigerians live below the poverty line of $1.9 per day.

If the government doesn’t act quickly, it could lead to more social unrest and political instability. Immediate action is needed to help Nigeria’s most vulnerable communities cope with these rising prices.

Q: “With the cost of essential food items soaring, many vulnerable people are struggling to afford enough nutritious food.”

Against the backdrop of economic uncertainty, key macroeconomic indicators, including GDP growth, inflation rate, unemployment rate, and exchange rate, are exhibiting unfavourable trends, defying the expectations set by frequent monetary and fiscal interventions. These indicators point to the profound economic challenges confronting Nigerians and the resultant hardships they endure.

The latest report from the Nigeria Bureau of Statistics (NBS) highlights a modest uptick in GDP growth of 3.46 percent in the fourth quarter (Q4) of 2023. However, the overall GDP growth for the year 2023 stands at a meagre 2.74 percent, falling short of both the previous year’s GDP of 3.10 percent and the projections put forth by the International Monetary Fund (IMF) and World Bank (WB), which anticipated a growth rate of 2.9 percent, as previously reported by BusinessDay. This discrepancy underscores the severity of the economic downturn and its impact on the Nigerian populace.

Nigerian economy

The GDP growth rates for Nigeria in 2022 and 2023 fluctuate across quarters. In 2022, growth ranged from 2.25 percent to 3.54 percent, showing volatility. In 2023, growth rates were slightly lower, between 2.31 percent and 3.46 percent. These fluctuations indicate ongoing economic challenges, demanding sustained efforts for stable growth.

In a broader context, according to recent data released by the Nigeria Bureau of Statistics (NBS), there has been a concerning uptick in inflation rates. In December 2023, the inflation rate stood at 28.92 percent, but by January 2024, it had climbed to 29.9 percent, indicating a noticeable increase of 0.98 percent.

Similarly, on a year-on-year basis, the headline inflation rate was 8.08 percent higher compared to the rate recorded in January 2023, which was 21.82 percent. This shows that the headline inflation rate (on a year-on-year basis) increased in January 2024 when compared to the same month in the preceding year (i.e., January 2023).

Furthermore, on a month-on-month basis, the headline inflation rate in January 2024 was 2.64 percent, which was 0.35 percent higher than the rate recorded in December 2023 (2.29 percent). This means that in January 2024, the rate of increase in the average price level will be higher than the rate of increase in the average price level in December 2023.

This rise has had a direct impact on food prices as well, with food inflation experiencing a parallel surge. From 33.3 percent in December 2023, food inflation escalated to 35.41 percent in January 2024, representing a rise of 2.11 percent.

On a year-on-year basis, the food inflation rate in January 2024 (35.41 percent) is 11.10 percent higher compared to the rate recorded in January 2023 (24.32 percent). These figures highlight the growing economic challenges facing Nigerians, contributing to a sense of uncertainty and dissatisfaction among the populace.

The Nigeria Bureau of Statistics (NBS) reveals that the rise in food inflation on a year-on-year basis was caused by increases in the prices of bread and cereals, potatoes, yam and other tubers, oil and fat, fish, meat, fruit, coffee, tea, and cocoa. On a month-on-month basis, the food inflation rate in January 2024 was 3.21 percent; this was 0.49 percent higher compared to the rate recorded in December 2023 (2.72 percent).

Fatima, a teacher in a local primary school in Lagos, shared her view, saying, “These days, it feels like the weight of the world is pressing down on me and my family. Every time I go to the market, I see the prices of essential food items soaring higher and higher.

“It’s not just about the numbers on the price tags; it’s about what those numbers mean for us. It means fewer meals on the table, more sacrifices to make ends meet, and constant worry about the future.

“I used to take pride in being able to provide for my children, but now it’s a daily struggle. My eldest son dreams of going to university, but with the cost of living skyrocketing, I fear those dreams may never come true. And it’s not just about food anymore; it’s about the ripple effect it has on every aspect of our lives. From education to healthcare, everything seems out of reach.

“It’s hard not to feel disillusioned and frustrated when you see your hard-earned money dwindling away, and there’s no relief in sight.”

She added, “We’re resilient people, us Nigerians, but even the strongest among us have their breaking point. We need more than just statistics and promises; we need real solutions that will bring tangible change to our lives. Until then, this ‘rotten mood’ will linger, casting a shadow over our hopes and aspirations.”

Amidst the intense food crisis challenges that cut across the country, the average Nigerian is feeling the pinch, with many struggling to make ends meet.

Babagana Zulum, Governor of Borno State, saw beyond physical effort, introduced a spiritual factor, and declared a one-day statewide fast to seek divine intervention on the rising cost of food items and the spate of landmine explosions across its major roads a few weeks ago.

Assuring the citizens the decisive steps to alleviate this issue,” explaining, “Our government is focusing on reviving agriculture in the state, intending to increase food production and reduce our reliance on food palliative.”

He continued that the state government would be investing in modern farming techniques, providing support to local farmers, and creating incentives for agricultural innovation.

“By doing so, we hope to not only lower the cost of food items but also to create sustainable livelihoods for our people,” he believed.

Not surprisingly, unemployment rose for two consecutive quarters in 2023. According to a report by the NBS, the rate of joblessness in the first quarter (Q1) of 2023 stood at 4.1 percent. In the second quarter (Q2), it rose by 0.1 percent, reaching 4.2 percent, and further increased to 5.0 percent in the third quarter (Q3), marking a 0.8 percent rise.

BusinessDay forecasts estimated that, with all other factors remaining constant, the rate of joblessness would rise by 0.3 percent when the fourth quarter (Q4) report is released by the NBS, bringing it to 5.3 percent for three consecutive quarters.

This increment can be attributed to the departure of major multinational companies that exited the country, as well as local firms that closed shops in 2023 amidst the ongoing economic crises, as earlier reported by BusinessDay.

Amidst the myriad challenges contributing to Nigerians’ pervasive sense of dissatisfaction, the volatility in the value of the Naira emerges as a significant disruptor of price stability, causing ripple effects across households and businesses alike. This ongoing issue resonates deeply with President Tinubu’s bold economic reform policy to float the Naira. However, instead of ushering in stability, the implementation of this policy has exacerbated the depreciation of the currency, intensifying economic pressures and deepening the woes of the populace.

Nigeria's economy

The implications of exchange rate fluctuations are indeed complex and far-reaching, impacting various facets of the Nigerian economy. One significant consequence is the contribution to the rising inflation rate, which recently stood at 29.9 percent, up from 28.92 percent in the previous month, according to data from Nigeria Bureau of Statistics (NBS). This uptick in inflation is largely driven by the increased cost of imports, as the depreciation of the Naira against the Dollar leads to higher prices for imported goods.

The inflationary pressure resulting from these exchange rate fluctuations puts strain on household budgets and diminishes purchasing power, especially concerning essential commodities. Moreover, the ripple effects extend to businesses, with major firms like Cadbury, Nigeria Breweries, Nestle, and Neimeth collectively recording losses of about N200 billion, as earlier reported by BusinessDay. This underscores the challenges faced by both consumers and producers in navigating the volatile currency environment.

Furthermore, exchange rate volatility creates uncertainty that deters foreign portfolio investment, as evidenced by the drop from N34.8 billion in November 2023 to N17.5 billion in December of the same year, according to data from Nigerian Exchange Limited.

This hesitation among investors to commit capital in such a volatile environment stifles economic growth and limits opportunities for foreign direct investment, which are vital for sustainable development.

Addressing these challenges requires concerted efforts to stabilise the currency, implement prudent monetary policies, and restore investor confidence. Failure to do so risks further exacerbating inflationary pressures, undermining economic growth, and impeding Nigeria’s path to prosperity.

Ultimately, the path forward requires more than just economic policies and government interventions. It demands empathy, compassion, and a renewed sense of solidarity among all Nigerians. Only by standing together, united in our shared humanity, can we weather the storm and emerge stronger on the other side.

In the end, it’s not just about numbers on a spreadsheet or political rhetoric—it’s about the lives and livelihoods of real people, each with their own dreams, aspirations, and struggles. And it’s our collective responsibility to ensure that their voices are heard, their needs addressed, and their hopes realised in a Nigeria that truly works for all.

Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).