• Wednesday, April 17, 2024
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BusinessDay

The Buhari Legacy Series: Inflation shrunk naira’s buying power under Buhari

The Buhari Legacy Series: Inflation shrunk naira’s buying power under Buhari

Itohan Iyoha, a 45-year-old teacher, was among the millions of Nigerians who thronged the streets to celebrate the victory of Muhammadu Buhari in 2015, when he was declared the winner of the presidential election.

Little did she realise that eight years later, her N60,000 salary would no longer take her home. “It was quite challenging for me but is worse off under the Buhari’s administration,” Iyoha, a mother of two, said.

“I can no longer survive on my N60,000 owing to inflation. I now rely on family members for survival despite working.”

When Gbenga Oladejo, a 42-year-old carpenter in Lagos, was celebrating the victory of Buhari in 2015, he was hopeful for a better life from a president that promised to eliminate corruption, reform an economy hooked on petrodollars, reduce poverty and create jobs.

But almost eight years later, his hope for a better life has faded as he was forced to shut down his carpentry workshop.

Low patronage and his inability to handle the steep rise in the rental fee – alongside his children’s school fees and all other costs that keep growing for a family of four — have forced him out of business and pushed him further into poverty.

“The constant increase in the prices of all items has made things very difficult for us. We can hardly feed since I shut down my shop and prices keep increasing daily,” he said. “This wasn’t the change Buhari promised us, and I regretted voting and campaigning for him in 2015.”

Since Buhari assumed office in 2015, prices of food items, stationeries, transportation costs, energy, and diesel have been accelerating in Africa’s most populous country.

A delay by Buhari in constituting his cabinet after assuming office saw uncertainty creep into the economy, and two recessions in quick succession hampered economic growth.

Average prices of staples across major cities in the country have surged by over 300 percent since 2015, causing inflation to hit 22.22 percent in April 2023.

Africa’s biggest economy has recorded a double-digit yearly inflation rate since 2016 in Buhari’s second year as president, wiping out a large portion of its middle class.

Nigeria’s inflation rate accelerated to 15.68 percent in 2016 from 9.01 in 2015. It also accelerated to 16.52 percent in 2017 and slowed to 12.09 percent in 2018. It further slowed to 11.40 percent in 2019 and accelerated to 13.21 percent in 2020, 16.98 percent in 2021, and 18.77 percent in 2022, according to BusinessDay’s analysis.

Real wages, which reflect the power of employee pay after accounting for inflation, have fallen in Nigeria by 100 percent, thus making Nigerians poorer than they were in 2015. The situation is worst for low-income households.

Nigerians are growing poorer at an alarming rate as the steady decline in average incomes or GDP per capita (calculated by dividing total economic output by population) since 2015 shows.

Shrinking GDP per capita means the economy is not growing fast enough to create economic opportunities like jobs for its people and that is a recipe for poverty.

The country’s GDP per capita declined by 0.02 percent, 4.16 percent, and 1.78 percent in 2015, 2016, and 2017 respectively. In 2018, 2019, and 2020, it declined by 0.68 percent, 0.38 percent, and 4.57 percent. In 2022, it increased to 1.2, according to the most recent data from the World Bank.

In 2018, the Brookings Institution published a report that said Nigeria had beaten India to become the poverty capital of the world, with 105 million people living below the poverty line.

The number increased by 60.4 percent when the National Bureau of Statistics (NBS) puts the number of Nigerians living in multi-dimensional poverty at 133 percent in 2022, compared to 82.9 million considered poor in 2019 by national standards.

“We have to move into my husband’s family house as our income can no longer sustain our daily expenses as prices of everything continue to surge,” said Adeyinka Abimbola, a 37-year-old teacher.

Rosemary Adewumi, a mother of three who was at Mile 12 market to make purchases, told BusinessDay that Buhari-led government brought hardship to Nigerians.

Adewumi said the accelerating inflation proved that poverty has deepened in the country since 2015 when Buhari took over office.

A 2015 and 2022 reports on African wealth by New World Wealth, a wealth intelligence firm, and Henley & Partners, showed that 5,400 Nigerians living in the country fell from the ranking of high-net-worth individuals as they no longer have up to $1 million in liquid assets.

The surge in the general inflation rate led to a 12 percent increase in household consumption expenditure to N27.3 trillion in the first half of 2022, the highest in five years, according to NBS.

With the cost of everything from food to stationeries going through the roof, a chunk of Nigeria’s middle class is said to have been wiped out as their purchasing power has dived.

“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.

Also, prices of imported raw materials used by manufacturers in production are surging owing to foreign exchange volatility. Naira, exchanged at N197 to a dollar at the parallel market has skyrocketed to N745 to a dollar as a result of dollar scarcity.

Read also: Nigeria’s inflation rate rises for fourth straight month

With prices of these raw materials at almost sky-high levels owing to FX scarcity, manufacturers are forced to increase the prices of their commodities to remain profitable.

A 2022 report by SB Morgen, titled ‘Nigeria’s History of Inflation: A Tale of the Destruction of Value’, identified the 2019 border closure policy, high import tariffs, petrol subsidy, and the current exchange rate regime of the Central Bank of Nigeria as major factors stifling supply, thus fuelling a surge in prices of various commodities.

The report said the combination of all these policies initiated by Buhari’s led government had ensured that the country’s inflation remained in double-digit, wiping out a large portion of the country’s middle class and making all Nigerians poorer than they were when he took over office.

Also, hunger and malnutrition rates have surged in recent years over a worsening rate of insecurity across the country.

A 2022 combined report by the Food and Agricultural Organisation (FAO), World Food Programme and the United Nations listed Nigeria among five other countries as the ‘hotspot of global hunger’ – where people are facing catastrophic levels of hunger.

FAO, in a 2023 report, said 25.3 million Nigerians are food insecure and malnutrition rates in most northern states have more than doubled.