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.
Read more 2021 IN REVIEW: The economy in 10 numbers
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.
Currently, the official rate for converting Nigerian naira to US dollar is N411.8/1$ from N377.0/$1 last year. While at the parallel or black market, it ranges from N560-N570/$1, which is about 16 percent higher than N470-490/$1 last year.
Most importers source their FX from the parallel market but the high cost has made it expensive for them to clear their goods, thereby still dealing with old stock.
Further rise in unemployment
According to a report by the Presidential Economic Advisory Council (PEAC), Nigeria’s unemployment rate is projected to increase further by 7 percentage points to 40 percent by the end of 2021.
As of quarter four (Q4) 2020, the country’s unemployment stood at 33.3 percent from 27.1 percent in Q2 of the same year. The report blames rising unemployment largely on the low capacity of the manufacturing sector.
Unemployment has adversely affected the disposable income of families and eroded purchasing power.
Cooking gas prices
The latter part of the year witnessed a spike in the price of refilling a 12.5kg cylinder for Liquefied Petroleum Gas (cooking gas). This added more financial stress to the already stretched consumers dealing with inflation and low incomes.
According to the National Bureau of Statistics, the average price for refilling a 12.5kg cooking gas cylinder rose by 62.8 percent over the past year.
Experts blame the price hike of cooking gas on the dearth of infrastructure, the global shortfall in gas supply, inadequate local production, shortage of FX, devaluation of the naira, logistic hitches, and the recent introduction of Value Added Tax charges by the Federal Government.
Insecurity
Analysts say 2021 is one of the worst years in terms of insecurity with several cases of mass abductions, kidnappings, and violent crimes in Nigeria, surging to their highest in at least a decade.
According to data from the Armed Conflict Location & Event Data Project, about 1,200 people have been kidnapped in the first half of 2021 from 45 in 2010.
The kidnap for ransom business is booming across Northern Nigeria, and schoolchildren are its hottest commodity. Nearly 900 students have been taken from schools in mass abductions since December 2020, data from the United Nations show.
A report by SBM Intelligence shows that N10 billion ($19.96m as of June 30) was demanded a ransom for kidnapped victims by criminal gangs.
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