2021 IN REVIEW: Why 2021 was difficult for consumers

The year 2021 has been a tough year for consumers in Africa’s biggest economy, despite the government easing the lockdown measures introduced to curb the spread of the COVID-19 virus last year.

The economic downturn during the pandemic led to rising unemployment, high prices, and decreasing disposable incomes among many Nigerian households last year and these negative impacts continued in 2021.

The outgoing year has been challenging for retail consumers considering the effects of the measures that were taken in the previous year to limit the spread, Moses Ojo, a Lagos-based economic analyst, says.

“This includes the increase in the prices of goods and services, especially food items. Although it is gradually moderating, the year has been challenging for retail consumers,” Ojo states further.

Commenting in the same vein, Ayodele Akinwunmi, senior relationship manager, corporate banking group, FSDH Merchant Bank, says he is not sure consumers had a good year, noting, “Incomes did not grow, inflation was high and as such what consumers could afford last year or two years ago, they are not able to afford again.”

The five things:

High prices

Although Nigeria’s inflation rate has been moderating for the past eight months, it is still at a double-digit rate of 15.40 percent as of November 2021, which is higher than 14.89 percent recorded in the same period of last year.
Furthermore, food inflation that constitutes more than 50 percent of the inflation rate has also been moderating but is still higher at 18.30 percent in November 2021 from 17.21 percent in November 2020.

The heightened insecurity challenges such as the kidnapping of farmers from their farmlands in various parts of the country and the high cost of living drove up food prices. Most consumers had to reduce food consumption to cope with the hike in prices.

In July, the World Bank noted that the country’s surging inflation rate pushed 7 million Nigerians into poverty.
According to the bank, before inflation started rising steadily, there were 82.9 million poor Nigerians but the number has risen to 90.1 million.

Foreign Exchange (FX) issues

Since the emergence of the pandemic, Nigeria that depends on oil proceeds has witnessed weak dollar inflows, resulting in a liquidity challenge in the country’s FX market.

This was further compounded by the Central Bank of Nigeria’s suspension of FX sales to Bureau de Change operators and the closure of websites that offer parallel rates.

According to SBM Intelligence, the suspension led to information asymmetry and panic-driven price surges as most importers source their FX from the parallel market, which in turn relies on information from such web pages.