Barely six days after Godwin Akpabio’s inauguration as Senate president, his security aides were seen riding expensive exotic power bikes as part of his convoy.
Many Nigerians who are feeling the pinch of economic reform have complained that politicians have shown no signs of cutting down the cost of governance and share in the pain.
Subsidy removal, naira devaluation, and the implementation of a value-added tax on diesel imports are causing further spikes in the prices of goods and exacerbating a cost-of-living crisis in Africa’s biggest economy.
The situation is likely going to worsen in July as analysts have projected a further acceleration in inflation when the imminent electricity tariff hike takes effect.
“It is getting difficult daily for Nigerians, especially with the recent petrol subsidy removal and naira float and other reforms the Tinubu’s led-government is doing,” Demola Balogun, a mechanic at Ketu, in Lagos, said.
“They are good reforms but they are seriously hurting Nigerians and businesses. My family can’t even afford to eat thrice daily anymore as prices keep soaring,” Balogun added.
The effects of the inflation scourge are more evident in the northern parts of the country where malnutrition and hunger rates are surging daily as millions of children roam the streets in search of food.
“Our cost of living has doubled owing to inflation, and we are left with nothing to feed,” said Ummi Ahmed, a 33-year-old housewife and mother of five in war-torn Mubi in Adamawa State – where people and animals fight to survive.
The worsening cost-of-living crisis is causing a decline in living standards, which is hurting physical and mental health and worsening existing conditions, according to experts.
The renewed pressure is not only felt by households but also businesses, as the recent reforms are already taking their toll and threatening to keep many out of business.
“I process fruits and vegetables and I have three generators and often buy five to 10 litres of petrol daily to power my two deep freezers,” Toyin Oladimeji, chief executive officer of Ola Foods, said.
“I bought a litre of petrol for N190–N210 last month; now I buy a litre for N500–N550 since the subsidy removal. My production cost has doubled owing to this amid declining sales,” Oladimeji said.
“All this is already threatening my business which has been struggling for survival. Right now, it is really difficult for small business operators who rely on petrol to power generators,” she added.
Price increases in Africa’s biggest economy have hit food products particularly hard, worsening the country’s multidimensional poverty that already affects 63 percent (133 million) of the population.
Last year, the World Bank said Nigeria’s accelerated inflation growth had eroded the N30,000 minimum wage by 35.5 percent and widened the poverty net with an estimated five million people in 2022.
The report highlighted that the country’s minimum wage, which was $82 in 2019, had dropped to $26 owing to accelerating inflation.
Nigeria’s inflation at 22.41 percent in May has outpaced wage growth, according to data from the National Bureau of Statistics, with several analysts projecting a higher double-digit rate in coming months.
Food prices are up by over 150 percent, and transportation costs have almost doubled respectively year-on-year, according to BusinessDay’s market checks.
The current economic realities have sparked more calls for the government to ease the nation’s cost-of-living crisis and put the brakes on rising prices by cutting down on the cost of governance.
Experts say that the reforms present the perfect opportunity to curb government excesses like the outrageous allowances given to lawmakers, selling off several planes in the presidential fleet, and pruning down wasteful government expenditures and inflated budgets that are not grounded in reality.
“Investors are focused on their profits and the masses of Nigeria are bearing most of the brunt of the necessary but painful reforms,” Kingsley Moghalu, former deputy governor of the Central Bank of Nigeria, said in a tweet.
The Nigerian government must move quickly to set up shock absorbers to cushion the people’s pain, Moghalu added.
Chinyere Almona, director-general of Lagos State Chamber of Commerce and Industry, said the chamber is concerned that there may be a consistent increase in inflationary pressures in the near term.
“There are also fears that fuel subsidy removal and the floating of the naira exchange rate will come with its inflationary impact,” she said.
“As a result, we anticipate businesses will implement a variety of cost reduction strategies, including downsizing and local sourcing of input factors as they bid to lower operating expenses.”
According to Almona, household real income will also continue to experience a decline, especially in the near term.
She said: “We recommend a pause in interest rate hikes to relieve the pressures on economic agents. We also urge the government to implement fiscal measures such as reducing/ removing the tax on basic food items to protect the most vulnerable as well as spur demand-side growth.
“We also implore the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents.”
In a June 15 note, analysts at CSL Research said importers of eligible items at the Investors’ & Exporters’ FX window will now have to source FX at a higher rate and will likely push the associated increased costs to the end consumers increasing the price of goods and services.
They added that since 2012, the Nigerian consumer has come under severe pressure.
The analysts said: “From partial fuel subsidy removals to the free fall in Naira in recent years to the imprints left by the border closure and insecurity in food processing regions, the Nigerian consumer has been left impoverished.
“In response, consumers have been trading down on the value chain, switching to cheaper alternatives as living costs rise in the face of generally low-income levels. With the expected rise in inflation following this current depreciation, we expect a further tightening of the consumer purse leading to low demand.”