5 inflation highlights that trended in 2021
As the tension and panic that associated the COVID-19 pandemic in the earlier parts of the year began easing off due to the release of vaccines, the Nigerian economy on the other hand began blowing hot as inflationary pressures and supply chain disruptions enveloped most households and different sectors within the economy.
It seemed as though inflationary pressures immediately began its encore as soon as the COVID-19 pandemic just finished executing its global performance.
Nigerian households have been roughing it out since the second quarter of 2021 largely as a result of inflationary pressures as well as the ripple effects of the COVID-19 pandemic which stifled economic activities in 2020.
Nigeria, being a country populated by a resilient bunch, however, navigated through this turmoil but was marked with badges from these inflationary conundrums which would continually be a reminder of how eventful 2021 was to various households, sectors and individuals.
In an attempt to put perspective to these inflationary trends that rocked 2021, BusinessDay highlighted 5 inflationary themes that rocked Nigeria in 2021.
Inflation hit 18.17%, highest in 4 years
The ripple effects of the COVID-19 pandemic were felt the most by Nigerians in the first and second quarters of 2021 as inflation romanced the economy like never before. The growing inflationary trend was evidenced in the National Bureau of Statistics (NBS) report which revealed that Nigeria’s Consumer Price Index (CPI) increased by 18.17 percent for the month of March, representing the highest rate increase recorded since January 2017. That also represented an 8.17 percent increase compared to the previous month which recorded 17.33 percent. The NBS attributed the headline inflation to a rise in the food index due to insecurity in the food baskets of the country.
The psychological impact of that facts sent shivers down the spines of many households as well as government and monetary authorities. This subsequently spurred the Monetary Policy Committee (MPC) into action as efforts were geared towards tackling inflation and bringing the economy back to normalcy.
Even though their efforts eventually bore fruit in the latter part of the year, the economy still felt the inflationary impact through the year due to poor policy implementation.
Prices of onions, tomatoes, and pepper rivalled prices of domestic flights hence, there is no more N100 plate of food in Nigeria
A one-way trip to Lagos from Abuja using Air Peace Airline in the first and second quarters of 2021 resided within the threshold of N24,000 and N29,000. For other parts of the country, the price range never exceeded N45,000. These prices, however, became the realities of restaurant owners and households whenever a pot of stew was on the menu. The prices of onions, tomatoes and pepper skyrocketed by 100 percent. At some point, onions was termed the ‘new Nigerian gold’. A big bag of onions which averaged N20,000 in the earlier parts of the year recorded a 325 percent increase as it sold for N85,000 as of November.
Also, the price of new onions increased by 261.1 percent as it recorded an increase from N18,000 to N65,000 within the period under review.
The price of a big bag of pepper on the other hand recorded a 105 percent increase, jumping from N15,000 to N31,500 between March and November.
A big sized basket of round-shaped tomatoes that initially sold for N16,500 rose to N32,500 representing an 81.5 percent increase between May and November.
These 3 food items (onions, pepper and tomatoes) represent the constants that any Nigerian kitchen requires when cooking any meal. This significant rise in the prices of the items was attributed to insecurity and supply chain bottlenecks in the food basket of the country.
Price of cooking gas equals 35% of minimum wage
The price of filling a 12.5kg cylinder of cooking gas increased from an average of N3,500 in January 2021 to N10,500 as of October 2021. This represents a 200 percent increase for the period under review. It also represents 35 percent of Nigeria’s minimum wage of N30,000. That goes to show that a minimum wage earner would spend 35 percent of his whole salary on cooking gas alone, minus food items that have surged over 100 percent during the same time period under review.
Nigerians have been reacting to this development, saying they have been forced to switch to alternative sources of cooking fuel. Many Nigerians that can still afford it have resorted to buying half the quantity they used to buy.
This development would continue to influence prices of food items from vendors which will, in turn, have an impact on headline inflation moving forward.
Cost of electricity increased by almost 100%
One anomaly in the Nigerian economy that has stood the test of time is the legendary ‘inadequate power supply’. While Nigerians have always complained bitterly about the lack of power supply in their homes, it has never detracted the power holding companies from increasing their tariffs. However, the recent increase in electricity meter prices in November left a mark. The Nigerian Electricity Regulatory Commission (NERC) in November increased the price of electricity meters in the country by almost 100 percent. They indicated in a memo that the changes were linked to recent changes in macroeconomic parameters.
Details from their report revealed that Single-phase meters which previously sold for N44,896.17 now sells for N82,855.19; while the price of a three-phased meter skyrocketed to N109,684.36 from N58,661.69.
The economic consequences are also dire. Nigeria is currently plagued with metering gaps of about 5 million which has been funded by government intervention running into N120 billion. With the current increase in assets, there is a high likelihood that the government may have to further increase the current N120 billion interventions moving forward.
Sachet water, bread surged by 100%, 150% respectively
The most affordable ‘universal solvent’ is gradually becoming ‘not so affordable’. There was a time when a sachet of ‘pure’ water was sold for N5. In some instances, it was given free as a ‘gesture’ of friendship or ‘appreciation’ of patronage in most restaurants. The narrative today has changed as residents of the federal capital territory have complained bitterly about the high prices of pure water (which has some affiliation with insecurity).
A bag of pure water that formerly sold for N100 currently sells between N200 and N250, while one sachet which sold for N10 now goes for N20. Vendors have accrued this increase to double taxation by authorities and also high costs of production.
Another universally accepted commodity that has witnessed the recent inflationary pinch is bread. The price of a loaf of bread today is equivalent to the price of chicken burger at Chicken Republic in 2018. A loaf of bread that sold for N350 before the pandemic increased to N500 by the second quarter (Q2) of 2021 and currently sells for N700 as of November of 2021. As expected, the Association of Master Bakers complained about the high cost of raw materials for bread production as well as other pastries. They also stated that the current increase in the cost of business registration has also contributed to this increment. Research revealed that the cost of business registration increased from N32,500 to over N90,000 and still rising.
Inflation dealt a great blow to the Nigerian economy and the ripple effects of this have been felt massively by the general populace.