Nigerians groan under economic crunch

The recent increases in electricity tariff, the pump price of fuel and the foreign exchange saga lead to the skyrocketing of the cost of goods and services as Nigerians groan under economic crunch

By Dike Onwuamaeze

Vincent Nwani, Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI)

Vincent Nwani, Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI)

Going for shopping nowadays has become a nightmare for Mrs Ajeigbe Ibrahim, a fashion designer in Lawanson, Surulere, Lagos. The escalating prices of foodstuff in the market has made it nearly impossible for her to estimate the prices of the commodities for effective budgeting before going to the market. “I am not able to draw my scale of preference and make accurate budget for my purchases before going to the market due to persistent rise in the prices of foodstuff,” she says. What she does now is to go to the market first and get the prices of the items she would buy and, thereafter, come back home to plan her budget. “Otherwise”, she says, “you will never be able to buy sufficient items for your family.”

Chidinma Obi-Okoye, a mother and co-pastor of the Liberty Sanctuary, Onitsha, shares the same experience with Mrs Ibrahim. Obi-Okoye is worried that what it cost to buy an item today would not be the same the following week or even in a matter of days. The price must have skyrocketed the next day. “Going to the market these days is dreadful because the value of the Naira is being eroded every day,” she says.

Indeed, the experiences of these two women are a reflection of the prevailing economic circumstances in the country as prices of goods and services have skyrocketed by the day. A market survey carried out by TheEconomy showed a general increase in the prices of foodstuff. The prices of 50kg of Thailand, Brazilian and Indian rice have gone up from N10,000, N12,000 and N9,500 to N12,000,N14,000 and N13,500 respectively between January and May 2016. Same goes for beans. The price of a 100kg of brown beans has gone up from N18,500 to N28,000 while “Oreni” beans, which is popular among children has soared from N11,500 to N13,500.

Similarly, the price of 50kg of “ogbono” has risen by 100 percent, from N60,000 to N120,000 in the past six months. Ironically, the bulk of “ogbono” sold in the Nigerian markets are imported from Togo and Cameroun. Sunday Okorie, a food seller at Oseni Street, Lawanson, said that imported “ogbono” is of better quality and in higher demand than the Nigerian variety from Osun State.

Furthermore, the price of groundnut has escalated by more than 25 percent in the last seven months. For instance, the price of a “mudu” of Ogoja groundnut has risen from N750 to N1,050. Likewise, the prices of red and Kampala groundnuts have increased from N750 and N650 to N1,000 and N950 respectively. In August 2015, a 100kg of pepper was sold for N28,000, now it goes for N52,000. Similarly, the prices of 75kg of corn, guinea corn and millet soared from N8,500, N9,000, N 7,000 to N12,500, N13,000 and N12,000 respectively between April and May 2016.

Also, the wholesale prices of Golden Penny’s spaghetti, spagettini and Indomie’s power pasta have risen from N1,700, N1,800and N1,900 to N3,200, N3,400 and N2,600 respectively in the past five months. In the same manner, the prices of tomato paste are escalating in the market. A carton of Gino and Tasti Tom tomato pastes formerly sold for N1,900 and N1,800 now costs N3,400 and N3,300 respectively. The price of one kilogram of Semovita has increased from N2,050 to N2,800 in the past three months. Similarly, the price of 25kg of groundnut oil has gone up from N5,200 to N10,000.

Farouk Ibrahim, a vegetable seller at Iju Water Works Road, told TheEconomy that he could no longer predict the rate at which prices fluctuate. He said the price of 25kg bag of cucumber hiked from N2,500 to N3,500 at Mile 12 market within 24 hours.

The general rise in the consumer prices is not limited to food items. The prices of clothes and shoes have skyrocketed. Ifeanyi Madu, a dealer on male shoes at Mandilas, Lagos, is worried that the prices are too high these days. “An average pair of shoes that we used to buy for N800 is now sold for about N1,200 by the manufacturers. How much am I expected to sell it? Nigerians are suffering,” he says.

The astronomical increase in the prices of goods and services have spread to electricity tariff and the pump price of fuel. There was 45 percent increment in the new electricity tariff which came into effect on February 1, this year. Consumers now pay N24 per kilowatt hour against N15.63 per kilowatt hour. Under the old rate, a customer who consumed 300 kilowatt hour, assuming supply was relatively stable in that particular month, would pay N5,466.19 including VAT and fixed charge of N750. However, under the new rate, R1 customer with the same energy consumption will pay N7,236, representing an increase of N1,769.81.

Following the recent removal of fuel subsidy by the Federal Government, the pump price of fuel was increased by almost 80 percent from N86 per litre of fuel to N145 per litre. Indeed, experts believe that recent increase in the pump price of fuel as well as hike in electricity tariff have been largely responsible for the skyrocketing prices of goods and services.

The current inflationary spiral in the Nigerian economy was well captured in the Central Bank of Nigeria (CBN) Communique No 107 of the Monetary Policy Committee Meeting held on May 23 and 24, this year. The CBN stated in the communiqué that in the first quarter of 2016, the economy suffered severe shocks due to energy shortages and price hikes, scarcity of foreign exchange and depressed consumer demand, among others.

The committee noted a further increase in year-on-year headline inflation to 12.77 per cent and 13.72 percent in March and April 2016, respectively, from 11.38 per cent in February this year. The increase in headline inflation in April reflected increases in both food and core components of inflation. Core inflation rose sharply for the third time in a row to 13.35 per cent in April from 12.17 per cent in March, 11.00 per cent in February and 8.80 per cent in January having stayed at 8.70 per cent for three consecutive months through December, 2015.

Food inflation also rose to 13.19 per cent from 12.74 per cent in March, 11.35 per cent in February, 10.64 per cent in January and 10.59 per cent in December, 2015. The committee traced the inflationary pressure to a number of factors, including energy crisis, as reflected in incessant scarcity of refined petroleum products, exchange rate pass through from imported goods, high cost of electricity, high transport cost, reduction in food output, high cost of inputs and low industrial output. The committee observed that since the economy is characterized by high import dependence, “the shortage of foreign exchange provided some basis for price increases as currently being experienced.”

According to the Nigeria Bureau of Statistics (NBS), April 2016 Consumer Price Index (CPI), inflation recorded a relatively strong increase for the third consecutive month. The headline index increased by 13.7 percent (year-on-year), roughly 0.9 percent points higher from rates recorded in March (12.8 percent). The higher rate of increase relative to March, was reflected in faster increases across all divisions which contribute to the index with the exception of the Restaurants and Hotels division which increased, albeit, at a slower pace for the third consecutive month.

The NBS identifies electricity rates, kerosene prices, the impact of higher PMS prices and Vehicle Spare Parts as the largest contributors to the core sub index. “These items as well as other imported items continued to have ripple effects across many divisions that contribute to the core. The index increased by 13.4 percent in March, roughly 1.2 percent points from rates recorded in the same month.

The Consumer Price Index (CPI) also recorded marked increases in urban and rural inflation indices for the third consecutive month in March. Urban index rose from 13.5 percent in March to 15.1 percent in April while rural index increased, upward pressure on prices were relatively less severe in the rural areas as the index increased from 12.0 percent in March to 12.8 percent in April on year-on year basis. Urban index increased on faster note on a month-on-month basis from 2.0 percent in March to 2.2 percent in April, while the rural index increased at a slower pace, from 2.1 percent in March to 1.4 percent in April.

Many have traced the current hardship Nigerians are passing through to the foggy foreign exchange regime that imposed multiple exchange rates on the economy. There is the official exchange rate, the inter-bank rate, petrol importers rate and the open market rate.

Vincent Nwani, director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI), says that the greatest challenge facing private enterprises in the country is uncertainty, rather than business risks. This, he adds, is due to the volatility in the foreign exchange market. “Uncertainty is like a fog. You cannot land and you cannot take off. Our members cannot take business decisions. And this is what the CBN has achieved so far,” Nwani explains. “The high exchange rate is not the issue but access. Our members cannot even source dollars to import raw materials not prohibited from the official foreign exchange market,” he adds.

He reveals that about three firms have informed the chamber about their plans to retrench workers. One of them had planned to sack 62 percent of its workforce in April because of lack of access to foreign exchange to import raw materials. “About 80,000jobs are at risk presently,” he says.

The financial sector is also witnessing a gale of retrenchment, especially in the banking sector. At least, more than 8,000 staff have been laid off in the banking industry in less than a year. Last month, Ecobank and Diamond Bank laid off more than 1,060 staff as a measure to cope with economic downturn in the country. Earlier on, First City Monument Bank (FCMB) and Fidelity Bank retrenched 700 and 100 workers respectively.

The loss of jobs in the banking industry has become so rampant that the Federal Government has been pleading with the captains of the industry to halt the trend. Dr Chris Ngige, minister of Labour and Employment, said that all the retrenchments done in the past four months should be put on hold to await the outcome of a proposed stakeholders’ summit for employers and employees of the banking, insurance and financial institutions scheduled for the first week of July, 2016.“Following the high spate of petitions and complaints from stakeholders in the Banking, Insurance and Financial Institutions, I hereby direct the suspension of the on-going retrenchment in the sector pending the outcome of the conciliatory meetings in the industry. This is as a result of the apprehension by my office of the various disputes in the sector in accordance and in compliance with the provisions of the labour laws of Nigeria,” Ngige says.

Malam Balarabe Musa, former governor of Kaduna State, is of the view that the nation’s socio-economic system would collapse unless government takes immediate measures to reverse the prevailing hardship in the country. “There is so much suffering in the land, there is anarchy everywhere. Something has to be done, otherwise, there is going to be a complete collapse of the system. Government has to find ways of tackling the unacceptable level of poverty and also intensify the anti-corruption drive,” he says.

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