What many Nigerians can buy today is three times less of the usual consumption basket they could afford five years ago, thanks to the country’s high cost of living and its record high unemployment rate.
Nigeria’s misery index, an indicator used in determining how economically well off the citizens of a country are, has jumped to 50.48 percent in March 2021 from 14.75 percent in 2015. It is calculated by adding the seasonally adjusted unemployment rate to the annual inflation rate.
“Climbing misery index implies declining economic activity and reduced consumption,” Charles Akinbobola, an analyst at Sofidam Capital, said
Among the saddest countries in the world, Nigeria’s high level of unemployment and stubbornly high inflation mean that there is a mismatch in the cost of living and the earning capacity of its citizens.
While Nigeria’s inflation rate quickened to a 49-month high at 18.17 percent in March, a level that shows it is more expensive to live in Africa’s most populous nation today than it was in 2015, the unemployment rate, which worsened to 33.3 percent in Q4 2020, from 27.1 percent the previous quarter implies that Nigeria now has a stagflated economy, a situation of poor Nigerians getting poorer in real terms, and the middle class getting thin out.
With food inflation at over a 12-year high (22.95% in March), the key driver of Nigeria’s core inflation, Odun Eweniyi, co-founder/COO of Piggyvest, said over 90 percent of Nigeria’s working population spend ~60 percent of their income on food/food-related expenses.
With Nigeria’s current realities, many of the country’s citizens are now more mired in poverty than most of their counterparts in other emerging economies.
Out of the list of 30 countries analysed by BusinessDay in 2019, Nigeria ranked sixth (39.66) among the most miserable destinations in the world. It was behind Turkey’s 50.6 percent, Brazil’s 52.3 percent, 75 percent in Iran, and 7,457 percent for Argentina.
An update of the survey in March 2021 shows that Nigeria is top on the BusinessDay list of the most miserable country globally.
Using the most recent inflation and unemployment data, Nigeria’s 50.48 percent index came ahead of Argentina’s 49.5 percent, Iran’s 47.2 percent, South Africa’s 35.7 percent and Turkey’s 27.8 percent.
“Before COVID-19, I was buying 2 to 3 bales of UK-used clothes from Cotonou, but since the lockdown my family and I have spent both the profit and capital for our upkeep,” a lady who simply identified herself as Mrs Aloko, said.
While the impact of COVID-19 is easily blamed for the recent economic woes in Nigeria, an evaluation of the country’s macro-economic indicators before the pandemic exposes how the pandemic only made what was already a bad situation worse.
Long before the pandemic started spreading across the globe late last year, Nigeria’s economy had been gasping for breath for five years.
Economic growth in Africa’s most populous nation averaged 1.2 percent between 2015 and 2019. The problem with that is the population grew two times faster at an average of 2.6 percent per year.
Those five years were a painful squeeze for Nigerians who grew progressively poorer, as economic growth was too slow to create sufficient opportunities for a rapidly rising population.
As if Nigeria was not already in a bad place, the COVID-19 pandemic dealt fresh blows to an economy that was always going to struggle.
But, Nigeria retains a long list of economic reforms that can unlock economic growth and reduce poverty but have been stuck. Decrepit infrastructure and the lack of a functional rail system means Apapa, which houses Nigeria’s main ports, remains a crying shame.
When transporting imported goods from a warehouse in Nigeria’s busiest seaport, businesses spend an average cost of $2,050, according to a research firm, SBM Intelligence. This is nearly 10 times the $208 it cost to transport containers from Durban Harbour to the South African warehouse. In Ghana, it cost $285 to transport containers to a local warehouse.
On what Nigeria can do to boost economic rebound and reduce the country’s misery index OluEbube Ezeoke, a senior analyst at Enzo, Krypton and Company, said Africa’s largest economy would have to bring down food inflation, the key driver of Nigeria’s inflation record.
“The agricultural sector will need a revamp to keep the rising food inflation down. The financial service is also a point to focus on as there is a low prospect for growth,” Ezeoke said.
According to Ezeoke, “A lot of people are scared to put their money into the economy because of the uncertainties surrounding the exchange rate. So, there need to be more incentives to attract inflows into the economy.”
The government’s focus to further improve the ease of doing business in Nigeria is key if the current situation will change, according to Yinka Ademuwagun, research analyst, FMCGs, United Capital plc.
“We believe the government or monetary authorities will need to go beyond pumping or injecting liquidity to stimulate growth across sectors,” Ademuwagun said, adding that the Nigerian government would need to “concentrate on driving productivity across sectors by leveraging technology.”