Naira crunch, petrol scarcity worsen Nigerians’ cost of living
The continued scarcity of naira notes and petrol in Africa’s most populous nation has aggravated the cost of living of cash-strapped Nigerians.
A BusinessDay survey of some major cities across the country shows people spending valuable time queuing in front of Automated Teller Machines (ATMs), experiencing exorbitant charges from Point of Sales (PoS) operators and inability to get money for transportation.
The situation has eroded the purchasing power of consumers who are already dealing with inflationary pressures at a 17-yr high.
Olaleye Tolulope, a Lagos-based mother of three told BusinessDay that the scarcity of naira has made it challenging for her to buy foodstuffs from local markets.
“The market women who sell food ingredients for preparing soup and stew, request for only cash because they are not used to mobile banking or transfers,” she said.
She said she now spends more due to the extra charges from PoS operators. “I was charged N2, 000 on Tuesday to withdraw N10, 000 from a PoS operator in my area.”
Raphael Idu, an Ibadan-based forex trader, said people in his area queue at filling stations as early as 3am.
“The traffic jam in my area has been strenuous due to the long fuel queues that emerge as early as 3 am. Even if you take public transport, you will be affected,” he said.
Idu added that most people now use boats to cope with the situation. “But the high demand has increased the fee from about N700/N800 to N2000/N3000, depending on the area you are heading to.”
The Central Bank of Nigeria (CBN) on Sunday extended the deadline by 10 days from January 31, 2023, to February 10, 2023, to allow the collection of the old 1000, 500 and 200 naira notes.
Godwin Emefiele, the CBN governor in a statement, said the sensitisation exercise on the naira redesign by the apex bank has achieved a success rate of over 75 percent of the N2.7 trillion held outside the banking system.
But since Monday, cash, including old and new naira notes were unavailable from banks’ ATMs and over the counter.
Bank customers who needed small cash to pay for transport fares, and other urgent needs could not find money to withdraw from the ATMs.
However, a few ATMs that were dispensing cash were crowded by a large number of people who queued to withdraw money.
More worrisome to Nigerians is the fact that some bank ATMs only dispense N1, 000 per transaction with N35 charges for other bank’s ATM cards. PoS operators charge N1, 000-2,000 to exchange N10, 000 old notes to new naira.
Ayomide Odunuga, a university student in Osun State, said there are no ATMs in his school, except in the town. “To get cash, you must use PoS and pay 10 to 15 percent of what you want to withdraw.”At first, it applied to new notes, but it later extended to the old ones.”
The phasing out of old currency notes, withdrawal limits, and the scarcity of new notes may have started to impact businesses and social livelihood beyond intentions, said Chinyere Almona, the director-general at the Lagos Chamber of Commerce & Industry
“While we support the drive toward a cashless economy, redesigning the naira and phasing out old currency notes could have been better planned and implemented with no hardship for businesses and individuals,” she said.
For energy, the scarcity of petrol which has been prolonged since the fourth quarter of last year has seen its pump price increase to N300 per litre from N170. This has led to long queues across petrol stations and hikes in food and transport costs across the country.
Analysts say the naira notes and petrol crisis could affect the projected easing of the country’s inflation rate for 2023.
According to the National Bureau of Statistics, Nigeria’s headline inflation rate slowed for the first time in 11 months to 21.34 percent in December 2022 from 21.47 percent in the previous month.
Ayorinde Akinloye, an investor relations analyst at Seplat Energy plc, said he would not be surprised if inflation data for January increases.
“Higher petrol prices have increased transport fares and logistics costs. This is going to be transferred to the cost of goods which would impact consumers’ demand,” he said.
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Damilola Adewale, a Lagos-based economic analyst added that the situation is having a telling effect on the citizens. “It has led to a spike in prices of food and non-food items. Households or consumers are now spending more to procure these items with fewer resources left to either save or invest.”
Last year, the World Bank said the country’s accelerated inflation rate eroded the N30, 000 minimum wages by 55 percent and widened the poverty net with an estimated five million people in 2022.
“The cumulative inflation between 2019 and 2022 was 55 percent, households’ purchasing power has slumped and the real minimum wage in 2022 after discounting for inflation is N19,355 while in dollar value is $26 after discounting for both inflation and exchange rate depreciation,” Alex Sienaert, chief economist at World Bank, Nigeria said.
On work productivity, Olamide Adeyeye, a Lagos-based human development researcher, said the uncertainty, fears and concerns from the naira and petrol scarcity is significantly impacting people’s mental health and their general wellbeing and that this has a strong correlation with their productivity.
“Human capital or development is not only based on skills and educational levels alone, but also on social and economic arrangement structures. The more tense people become, the less productive they are,” he added.