The air in Africa’s most populous nation is laced with anguish and desperation, fanning fears of a social crisis never before seen since the country’s transition to democratic rule in 1999.
Over the past few weeks, several kidnapping cases have been reported in six states and Abuja, the nation’s capital. Protests have also broken out in different parts of the country in reaction to the high cost of living, with citizens in Niger, Kano, Ogun, Osun and other states demanding solutions to the economic crisis.
The Sultan of Sokoto, considered the spiritual head of Nigeria’s vast muslim population, had strong words to describe the economic crisis when he said Nigeria was sitting on a keg of gunpowder.
“There are indications of a looming crisis as a result of the rising cost of living, especially with food prices. For instance, the cost of bread and rice are high including cooking gas,” Muda Yusuf, chief executive officer of the Centre for Promotion of Private Enterprises, said.
Yusuf said the government needs to engage big players in the food production industry for emergency periods like this and give guarantees to local rice farmers that they will take up whatever they produce.
Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said there is already a social crisis in the country.
“A social crisis is typically caused by one of two factors, or both: a political crisis and an economic crisis. We need the federal government to continue to act aggressively on the economic front to avert an economic-induced social crisis. At the centre of this conversation is price stability,” he said.
Omosuyi added that there is a need to discuss and act on how to get people back to the farm without fear plus other incentives.
He stressed the need to attract foreign inflows with minimal or zero foreign exchange loss through an effective currency risk management strategy.
Since President Bola Tinubu announced petrol subsidy removal during his inauguration on May 29, pump prices have more than tripled, while the value of the naira has plunged following the floating of the currency, becoming the world’s worst-performing currency so far this year.
Last June, the Central Bank of Nigeria (CBN) merged all segments of the FX market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.
The naira has continued to depreciate against the dollar and other major foreign currencies since then.
The official exchange rate fell from N463.38/$ to N1,503.4/$ as of February 14, 2024. At the parallel market, the naira is now pushing above N1,500/$ from 762/$.
Although the reforms have increased revenue for the government, it has also worsened the hardship facing the people as inflation rate has accelerated to a record high level.
According to the National Bureau of Statistics (NBS), the headline inflation rose to 29.90 percent in January from 28.92 percent in the previous month. Food inflation rose to 35.41 percent from 33.93 percent.
“One bag of beans that used to be N30,000 is now sold at N107,000 from Goro garage… revolution looming!!!,” Lateef Bolumade said on social media platform X.
A BusinessDay survey of some markets in Lagos State shows that a bag of rice sold at N33,000 last May now costs N68,000. The price of a carton of noodles, which was N3,200, has doubled to N6,800, and spaghetti is now sold for N15,000 as against N9,000.
Prices of cooking gas have skyrocketed to N1,300 per kilogram from N500 in 2018, mounting pressure on many who rely on it for their daily cooking needs.
“What do we use to cook now?” lamented Tolani Adeyemo, a Lagos-based food vendor. “Everything is going up, food, transport and now cooking gas. Even charcoal, another alternative, is a luxury”.
Emeka Andrew, a wholesaler at Ikotun market, said the instability in prices of goods almost made him close up his shop last December.
“If we go to market today, the prices we meet will be different from what we bought the previous day. I was even thinking of closing up and switching to another business last year,” he said.
The price of a bag of cement, which ranged between N3,300 and N3,500 in Lagos and Ogun states in 2021, has jumped to between N6,500 and N7,000. It surged to N13,000 in Enugu, N9,500 in Owerri/Aba and N9,000 in Onitsha.
“Most of the items used in construction have increased at an alarming rate. Laterite, which is used for filling, was N55,000 last year but you can’t get it for less than N90,000 now,” Idris Adekunle, a Lagos-based structural engineer, said.
During the sixth executive committee meeting of the Northern Traditional Rulers Council on Wednesday, Muhammad Abubakar III, the Sultan of Sokoto, said the economic hardship in Nigeria had reached a level where citizens were agitated, angry, and hungry.
He said: “To make matters worse, we are faced with the rising level of poverty amongst our people, lack of normal sources of livelihood for the common man to have even if it is one good meal a day.
“I believe talking of insecurity and the rising level of poverty are two issues that we cannot fold our arms and think everything is okay. I have said it so many times and at so many fora that things are not okay in Nigeria and of course, things are not okay in the North.”
Last year, Tinubu declared an immediate state of emergency on food insecurity to tackle the increase in food prices. He unveiled a comprehensive intervention plan on food security, affordability, and sustainability, by an immediate release of fertilisers and grains to farmers and households to mitigate the effects of petrol subsidy removal.
On Wednesday, Abubakar Kyari, minister of agriculture and food security, expressed the readiness of the federal government to freely distribute a total of 42,000 metric tonnes of assorted grains to Nigerians, in response to the rising food crisis in the country.
He said efforts were ongoing to ramp up the production of food, adding that there are plans to incentivise farming activities in the country.
To address the excess liquidity in the economy, the CBN said in November that it deployed some measures, including an open market operation (OMO) auction that was oversubscribed by N350 billion.
The apex bank added that another OMO is set to take place imminently. It also offered N108 billion in treasury bills to the public.
Governor Olayemi Cardoso said the policies helped the central bank to reduce liquidity in Nigeria’s banking system to less than N100 billion.
BusinessDay reported on Wednesday that more businesses could shut down because of unstable macroeconomic indicators, which have affected the medium and long-term plans of many businesses.
“Once the exchange hits N1,800 – N2,000 per dollar, you are going to see a crisis. More businesses are going to close shop and the japa wave will further surge,” Okafor Tochukwu, a senior lecturer at Baze University, Abuja, said.
He said the social crisis will lead to a high mortality rate. “We are going to have an increase in mortality rate, which is the major fear that people are having.”
Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, said everything in the economy has gone from bad to worse. “No company, whether small or micro, can plan or project for the future now because they plan on stable indices.”
Last year, the World Bank said in its latest Nigeria Development Update report that rising inflation and sluggish growth in Africa’s biggest economy increased the number of poor people to 104 million in 2023 from 89.8 million at the start of the year.
Before the NBS adopted a new methodology for labour statistics, unemployment had quadrupled to 33.3 percent as of Q4 2020 from 8.2 percent in Q2 2015. It was put at 4.1 percent in Q2 last year, down from 4.2 percent in the previous quarter.
Despite the reforms, foreign investments into Nigeria dropped to $654.7 million, the lowest level since the statistics bureau started collating the data in 2013.
In South Africa, investors can feel safe in cities like Cape Town, Johannesburg, and Gauteng, said an anonymous investor.
“It’s not as if there are no incidents of insecurity but the country’s public relations emphasise low crime rates. Unlike Nigeria, where investors face extensive paperwork, require armed security, and need a series of approvals from their security team to visit,” he said.
He added that consequently, many potential investments have chosen Rwanda, South Africa, Kenya, and Ghana due to their stable security situations and lower crime rates.
“Concerns about insecurity and the risk of terrorist attacks in Nigeria have caused some investors to reconsider their plans.”
According to Adeola Adenikinju, president of the Nigerian Economic Society, reforms that have a significant impact on middle- and low-income earners should be followed by “income support programmes” that could cushion its effects.
Citing the cash transfer programme in the United States during the COVID-19 pandemic, he stressed that further protests can be avoided if palliatives and other support systems can be made available to poor people.
“Government must find a way to revive the social transfer programmes especially to support the most vulnerable who may have been affected by these crises,” he said.
