The economic misery of Nigerian households and businesses have been compounded in recent weeks by the rising cost of food and petrol, dwindling power supply and grounded flights.
The rising cost of living in Africa’s most populous nation is delivering a fatal blow to the economic recovery witnessed by the country in 2021.
Low and middle-income families have been affected disproportionately because the rise in prices is mainly evident in essential products.
February’s inflation rate rose 15.70 percent year on year, with core inflation witnessing it’s highest rise since 2017 on the back of increased fuel and diesel costs; one emerging with staggering speed.
More staggering will be its impact on food prices as experts forecast food scarcity by the middle of the year which could see Nigerians witnessing the deepest living standard squeeze on record.
Accompanying this grim fate is the power epilepsy across the nation. Nigerian households and businesses have been hit hard by the double whammy of a lingering fuel crisis and worsening power outage, as economic activities are beginning to cripple across vital sectors.
Residents in the capital city of Abuja have complained bitterly as most households and businesses can’t boast of 3-5 hours of power supply daily and are forced to run their generators all through the day amidst the current fuel scarcity.
Ohiozei Obaseki, a business entrepreneur who resides at Apo district in Abuja lamented at the gravity of the situation on both his business and household.
“I know Nigeria has always been accompanied with challenges and inefficiencies, but this current situation seems as though it has reached its climax,” Obaseki said.
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“I’ve totally exhausted my budget for the first half of the year and I’ve not even gotten through the first quarter.
“My business is struggling and my family is also my greatest priority and the current situation is forcing me to pick sides between both,” he said.
Nigeria’s national electricity power grid collapsed again on Tuesday the 16th of March, 2022 and has lingered in most states without any response from the authorities.
David Ibidapo, a senior analyst at AFEX stated that asides the domestic pressures bedevilling Nigerian households, external pressures play a greater part in the current squeeze with global wheat prices for instance rising and impacting food costs.
Uche Uwaleke, a professor of finance and capital market and president of the Association of Capital Market Academics of Nigeria stated that the current wheat and rice crisis is definitely going to spur food inflationary pressures in the medium term.
“The current decline in the supply of wheat is definitely going to be felt most in the North and going to fan inflationary pressures in the country,” Uwaleke said.
Aliko Dangote, chairman, and chief executive of Dangote Group while speaking at the 4th annual food processing and nutrition leadership forum in Lagos stated that limited access to fertilizers as a result of the Russian-Ukraine crisis would translate to food scarcity which would in turn translate to increased inflationary pressures.
“Russia and Ukraine account for about 30 percent of the world’s urea production and 26 percent of the world’s potassium supply, access to these input components will increasingly be stifled for as long as the war persists and could cripple the goal to fortify staples from source.
“Not only wheat or maize will be affected but a lot of components because as we speak, potash and urea supply are held largely by Russia and Ukraine. There will be a scarcity of food because people will not be able to access fertilizers going forward. But we may not see the effects now but in the next two to three months, it will be reflected in inflationary pressures,” Dangote said.
The challenge this poses to policymakers is the final nail in the coffin as to any hope of economic recovery this year.
Analysts at the Economist Intelligence Unit (EIU) re-assessed Nigeria’s fiscal position stating that the country’s fiscal situation will worsen considerably this year under the weight of soaring energy prices, which should otherwise have been a blessing, with budget deficit rising to six per cent of gross domestic product (GDP) and inflation surging past 16 per cent.
“We will revise up our inflation projection of 13.7 percent in 2022, probably to within the 15-16 percent range, to account for global supply shocks.
We will also modify our fiscal deficit forecast for 2022, from 4.5 percent of GDP to about six percent, which would be the highest since the 1990s,” the analysts said in their report published Tuesday.
The Central Bank of Nigeria (CBN), meanwhile, faces the most difficult period for monetary policy since the pandemic-induced recession of 2020. Inflation is well above target and rising. Initially energy cost-driven inflation, now price rises are broadening out.
The recovery from the pandemic was faster than expected, but rising inflation has already removed any sense of a boom.
Anyone certain about how 2022 plays out needs a good dose of humility.
These are tough times for economic policymakers but even tougher times for low and middle-income households.
