Analysts are urging the federal government to address the worsening insecurity, tackle high energy costs and stabilize the country’s foreign exchange as a step to immediately cut costs for Nigerians amid dwindling revenue and surging prices.
The average prices of household items across major cities in the country have surged by over 200 percent in the last year, causing inflation to accelerate to 24.08 percent in July, the highest since October 2005. Also, food inflation accelerated to 26.98 in July, according to data from Nigeria’s Bureau of Statistics.
As issues of terrorism, banditry, and kidnapping continue to escalate, farmers in Africa’s most populous country have forced farmers to abandon their farms as they seek for safety.
Since the security situation became intense a few years ago, several farmers have fled to safety, and several agribusinesses have been destroyed after the destruction of their facilities.
The situation has hampered the country’s ability to diversify through agriculture and generates substantial FX through the sector despite its potential.
“Our food production has not been growing in the past few years owing to insecurity in the country. If we want to tackle the high cost of food and inflation, we must address the insecurity situation in the country,” said Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise in a response to questions.
The situation has also forced some families to cut down on some essential foods, with many skipping meals, thus driving malnutrition in the country, experts say.
Power accounts for as much as 40 percent of factories’ costs in Nigeria, according to the Manufacturers Association of Nigeria
However, the poor power supply in the country and the constant collapse of the power grid led to many companies relying on alternative sources of power.
Diesel, which is used to power generators by most businesses in Nigeria, has impacted on prices for consumers.
The price of diesel has soared by 178 percent year to date to an average of N 800 per litre from an average of N288 in January last year. While the logistics costs of moving products from the south where the bulk of the factories are located across the country have doubled.
The recent hike in the prices of petrol in Africa’s largest economy has led to a fresh spike in food prices, dashing hopes of returning to a more stable market condition.
Petrol price has soared by an average of 174.6 percent to N526.7 per litre from an average of N191.8 per litre, according to BusinessDay’s calculation of NNPC’s new/old price list.
Manufacturers have constantly complained about their inability to get enough FX from the official window to import critical inputs for production.
This is because the dollar is scarce in Africa’s biggest economy. Despite the recent unification of the exchange rate, the country is yet to fully unify its different FX rates.
On August 16, at the parallel market, the exchange rate between the naira and the US dollar closed at N910/$1, according to data by AbokiFX, an online platform that tracks the exchange rate on the parallel market.
The government must improve its non-oil export proceeds through agro-industrialisation to earn more foreign exchange and boost its FX reserves.