• Wednesday, June 19, 2024
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Inflation outpaces Nigeria’s real wages by 100%

Inflation outpaces Nigeria’s real wages by 100%

Pay is failing to keep pace with inflation in Africa’s biggest economy, with civil servants and low-income households most hit by the squeeze.

The fall in real wages, which reflects the power of employee pay after accounting for inflation, is making Nigerians face increasing pressures daily and forcing them to make hard choices as prices of all products continue to rise.

Nigeria’s inflation accelerated to 20.5 percent in August, the highest in 17 years, according to the National Bureau of Statistics, and looks set to go even higher if the government fails to act on soaring food, and diesel prices, analysts say. Africa’s biggest economy has been grappling with double-digit inflation since 2016.

“With accelerating inflation, the real value of wages will continue to fall, and this affects how far salaries go in the day-to-day life of employees,” Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, said in a response to questions.

“The current cost of living crisis we are experiencing now is one of the worst we have ever had in our history. People cannot feed properly and there are no safety nets for businesses or individuals,” Egbesola said.

Households and businesses have been treading water for decades – weighed down by dwindling income and rising prices – but the spike in inflation that resulted from the pandemic and the impact of the Russian-Ukraine war is causing frustrations among Nigerians.

About 90.4 million Nigerians are food-insecure, and malnutrition rates in most northern states have more than doubled, according to the Food and Agricultural Organization.

A July 2022 analysis by the United Nations on prices shows that a 10 percent increase in food prices will trigger a five percent decrease in the incomes of households. Food prices in Nigeria have surged by over 100 percent since January to date, and going by the UN analysis, the real wages of Nigerians will have decreased by over 50 percent.

“Survival is the most difficult thing in Nigeria now irrespective of whether you are in the upper, middle or lower-income class; as there is no source of income, the surging inflation is not affecting,” Benson Salami-Olayanju, chairman of Panfcm-Tech-Wise Treasure Investment, said.

“We are experiencing cost-push inflation and it is fast eroding incomes,” he said.

Read also: Tips to grow your money amid accelerating inflation

He urged the government to tackle the surge in food prices to tame inflation, saying households spend over 50 percent of their monthly income on food.

Like other central banks across the world, Nigeria’s apex bank has also moved to curb inflationary pressures by raising interest rates by 150 basis points to 15.5 percent and the country’s cash reserve ratio to 32.5 percent from 27.5 percent.

In an attempt to gauge the human impact of the country’s cost of living crisis, BusinessDay spoke to some Nigerians in cities and found out that many are already struggling to make ends meet and cutting back on everyday items.

Maryam Adekunle, a 32-year-old teacher and mother of two in Lagos, says she no longer takes her favourite breakfast owing to the jump in the prices of beverages.

“At home, we don’t buy gas to cook anymore. We now use charcoal as it is cheaper and I do not enter Keke to take my children to school. We have to trek daily to school now because we can’t afford the surge in transportation cost,” Adekunle said.

For Chinwe Chukwu, a mother of three and trader in Benin, Edo State, her family’s weekly transportation and food costs have more than doubled to reach about N25,000, despite her family’s efforts to economise.

Over 105 million Nigerians still live in extreme poverty, according to data from the World Poverty Clock of the Brookings Institute. The World Bank recently projected that Nigeria’s accelerating inflation will push an additional 7 million into poverty by the end of 2022.

While it would appear that the economy has improved, culminating in a 3.54 percent growth in the second quarter of 2022, most of it is elusive. It is eluding a vast majority of Nigerians and has not been able to reduce poverty or lead to the creation of sufficient jobs.