Analysts in Africa’s biggest economy are predicting that the country’s headline inflation will accelerate further on the persistent naira and fuel scarcity and the post-election tensions that shut down several businesses.
In January, Nigeria’s inflation rate rose to a 17-year high after slowing down in December for the first time in 11 months. According to the National Bureau of Statistics, it quickened to 21.82 percent from 21.34 percent in the previous month.
A recent report by Financial Derivatives Company said inflation is expected to increase further in February as a result of the unintended consequences of the naira swap programme, election spending, and high energy costs.
“However, we expect the CBN to intensify efforts towards aligning with the federal government to securitize its ways and means advances that should curb money supply growth and rein in inflation in the near term,” it said.
Africa’s most populous nation is being roiled by internal crises. Households and businesses are being whipsawed by a severe petrol scarcity that has lingered since November and a chronic shortage of cash occasioned by the naira redesign policy of the Central Bank of Nigeria (CBN).
The scarcity of naira notes has slowed down economic activities in the country. Manufacturers said they were already seeing a drastic reduction of more than 25 percent in sales of locally manufactured products.
Uchenna Uzo, consumer expert and faculty director at Lagos Business School said if post-election tension continues for a longer period, prices of goods and services may rise further.
He said the higher prices will come from the scarcity of goods as a result of people not producing as much and businesses not fully opened.
Ikemesit Effiong, head of research at SBM Intelligence added that an extended period of post-election uncertainty accompanied with post-election violence is going to lead to an upward trend in prices which will also hamper economic growth.
“If people don’t feel safe, they will not open up shops. And you will begin to see scarcity of important items leading to higher prices,” he said.
Since Saturday, tensions had been high across the country as Nigerians awaited the outcome of the hotly contested presidential election.
On Wednesday, Bola Tinubu, the presidential candidate of the ruling All Progressive Congress was announced the winner.
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He polled 8.8million to defeat his closest rival, Atiku Abubakar, candidate of the main opposition Peoples Democratic Party who scored 6.9 million and Peter Obi, the presidential candidate of the Labour Party who garnered 6.1 million while Rabiu Kwankwaso of New Nigerian Peoples Party got 1.5 million.
BusinessDay had reported on Monday that the anxiety surrounding the outcome of the elections had dampened business activities, especially in the informal sector.
Experts say this presents dire consequences for Africa’s biggest economy as businesses are already stretched financially due to the scarcity of naira notes and petrol.
“The presidential elections have raised the level of anxiety and the risk of post-election violence, which can be terrible for any economy,” said Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise.
“It is something that happens in many parts of Africa and if it is not properly managed, it can be a much bigger problem for the Nigerian economy.”
He said if people are afraid to go out to start their various businesses or there is a confidence problem around the elections, the impact on businesses and investments is always extremely very negative.
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