The rising spate of food prices coupled with the recent hike in fuel and electricity costs is causing a strain on the already-squeezed purchasing power and income of Nigerian households, thereby making them miserable amid the drastic impact of the Covid-19 pandemic on their finances.
A BusinessDay survey on how consumers are coping with the unpalatable situation shows that while some have trimmed their expenses to match their income levels, others have ventured into other businesses aside their normal jobs to make ends meet.
Ayodele Shittu, a lecturer in one of Nigerian public universities, said that it has not been easy coupled with the fact that his salary has not been consistent. “I have not been paid since June. And for my family to survive, we had to cut down on our expenses to the barest minimum. Normally, a loaf of bread that is bought every day and buying snacks for the children have reduced,” Shittu said.
Kayode Akinolue, a Lagos-based medical doctor expressed concerns over the inability of the Muhammadu Buhari administration to make things easier for the average Nigerian. “For my company that I co-manage with a friend, we had to stop paying ourselves salaries so that we can pay our staff. And as a result, I had to start doing some personal jobs like online teaching and training to feed my family,” Akinolue said.
With consumers’ real income dwindling in light of persistent rise in domestic prices, households with savings have been forced to fall back to it to augment their earnings. “It has affected my disposable income because now I am spending more. I am using most of my saving to compensate for my family expenses,” Damola Akinyemi, a researcher, said.
Since the increment in pump price of petroleum products and electricity tariff, Nigerians have been showing their displeasure by partaking in several protests to get the attention of government.
Ayorinde Akinloye, a consumer analyst at CSL Stockbrokers, said it was a challenge for them because incomes are shrinking, salaries are being slashed and many people have lost their jobs.
“So, the increases are putting a serious strain on their incomes. Most consumers will now decrease spending on those items that are not needed so that they can compensate for the essential,” Akinloye further said.
The price pressure stems largely from the removal of fuel subsidy by the Nigerian National Petroleum Corporation (NNPC) at the peak of the coronavirus pandemic in March 2020 following the collapse of oil prices to as low as $15 per barrel.
The corporation announced a market-based pricing regime in which petrol price will be determined by the prevailing trends in the international oil market. The recovery of oil prices coupled with a weaker exchange rate means that Nigerian consumers are now purchasing the commodity at a relatively higher price at the pump, and this translates to higher transport fares, higher production costs as well as higher logistics costs in conveying food items from farms to markets.
In another development, the Federal Government abolished subsidy on electricity tariff, and enforced transition to a service-reflective regime in which tariff will be consumption-based. However, the increment applies to customers enjoying grid supply for at least 12 hours each day.
“The intense pressure on prices we are currently experiencing reflects the short-term impact of the reforms implemented by the government,” said Damilola Adewale, a Lagos-based economic analyst. “Those reforms are prerequisites to securing credit facility from the International Monetary Fund and World Bank”.
Adewale stated that it was unfortunate the hike was introduced at a time consumers are grappling with the impact of the pandemic on their finances.
‘Those conditions cannot be avoided since the government needed funds to mitigate the impact of the Covid-19 crisis. As we speak, they are still talking with the World Bank for a fresh $1.5 billion facility. Ideally, those reforms are in the best interest of all economic agents, but we just have to endure this phase till the impact of these reforms start materialising in the medium term,” Adewale further said.
During a two-day First Year Ministerial Performance Review Retreat held in Abuja recently, government said that they were extremely mindful of the pains that higher prices mean for consumers at this present time. It however, added that it was necessary to raise funds as the Covid-19 pandemic led to a severe downturn in the funds available to finance the nation’s budget.
Currently, households are struggling to cope with the impact of the pandemic and are deploying strategies that may have negative long-term consequences on their welfare.
According to a recent report by the National Bureau of Statistics (NBS), in all four states (Lagos, Abuja, Kano and Rivers), at least, two-thirds of households had spent their savings to cover their living expenses. Data from the National Bureau of Statistics (NBS) on Gross Domestic Product (GDP) by Income and Expenditure approach at 2010 purchaser’s values shows that consumption expenditure of households has been declining at varying pace since it rose by 1.5 percent in 2015.
Worse still, the per capita income in Nigeria has declined to $2,049 in 2018 from $3,268 in 2014, according to the International Monetary Fund (IMF).
According to the NBS, headline inflation, which serves as a measure of consumer prices, rose at a faster pace for 11-consecutive months, reaching a 27-month high of 12.8 percent in July, while Nigeria’s unemployment rate came to 27 percent in Q2 2020, as more and more people were rendered jobless from the impact of the pandemic.
Steve Hanke, a global and renowned economist, twitted on his personal twitter handle last Monday that amidst depressed oil prices, decades of corruption and the pandemic, Nigeria now ranks 7th on his World Misery Index.
When it comes to the provision of palliatives by the government to help relieve its citizens to offset the economic impact of the pandemic, Nigeria may have failed to emulate its global counterparts who have been at the frontline in providing massive support to households, businesses and corporates hit hard by the virus.
According to a recent survey conducted by SBM Intelligence, only 1.2 percent of respondents received some form of support from the government while 98.8 percent of respondents claimed not to have received any form of support or palliatives.
“Deregulation relief packages for specific vulnerable groups and specific periods of time are needed. In the late 1980s, Structural Adjustment Programme (SAP) relief packages were given to workers for six months for example,” Ayo Teriba, CEO of Economic Associates, said.
Teriba further said: “You should however, include other vulnerable groups in addition to workers. The Petroleum Trust Fund was indeed created in the 1990s to cushion the pains of subsidy removal. But cash transfers or vouchers are more welfare enhancing than distribution of non-cash benefits like the famous ‘essential commodities’ of the 1980s.”
