Cape Times

Nigeria’s daily woes are getting bigger

Inflation highest in a decade

- David Malingha

IT IS 4pm in Nigeria’s capital Abuja and Ahmed Chiji has been running from car to car near the National Mosque selling cellphone airtime vouchers. His total for the day: 500 naira (R20.85).

That is as little as a 20th of what he was selling at the beginning of last year before the economy – hit by falling crude oil prices, militant attacks on oil pipelines and foreign exchange shortages – began contractin­g.

Chiji, a 27-year-old high school dropout, says he can no longer make ends meet at a time when the inflation rate is at the highest in more than a decade.

Worst still to come “The government is asking us to be patient for them to do something,” Chiji said at an intersecti­on in Abuja. “I think the worst is yet to come.”

The economic squeeze Chiji and millions of other Nigerians are feeling each day may be confirmed today when the statistics agency issues a report probably showing the economy contracted last year for the first time in a quarter century.

It comes at a time of almost universall­y bad news for Africa’s most-populous nation. The unemployme­nt rate has doubled, inflation is accelerati­ng and President Muhammadu Buhari has been in London since January 19 receiving treatment for an undisclose­d medical condition. No one knows when he will return.

“It’s a foregone conclusion that the Nigerian economy went into a full-year contractio­n,” said Manji Cheto, senior vice president at Teneo Intelligen­ce in London. “Ordinary Nigerians have been hit very badly.”

Unemployme­nt has doubled, inflation is accelerati­ng and President Muhammadu Buhari has been absent.

Gross domestic product contracted year on year in the first three quarters of last year. The statistics agency report will probably show that the economy shrank 1.5 percent in the last three months, according to the median estimate of nine economists surveyed. The Internatio­nal Monetary Fund forecast a 1.5 percent contractio­n for last year.

The 13.9 percent unemployme­nt rate in the nation with 180 million people is the highest since at least 2010 and food prices rose 17.8 percent in January from a year earlier.

Inflation has accelerate­d for the past 15 months, prompting the central bank to raise its key lending rate to a record high of 14 percent.

“Businesses and consumers are under considerab­le strain,” said Yvonne Mhango, a Johannesbu­rg-based economist at Renaissanc­e Capital. “Consumers who are still employed have seen their disposable income eroded by double-digit inflation, implying their purchasing power is falling.”

Prices of imports from food to petrol climbed as the naira lost about 40 percent of its value against the dollar after the central bank removed a currency peg in June.

The regulator continues to block importers of items it deems non-essential from the official foreign exchange market, forcing them to buy dollars on the black market where the currency is about 30 percent more expensive.

Price increases The naira strengthen­ed 1.2 percent to 310.95 against the dollar by yesterday morning in Lagos, according to data. The currency closed at 440 per dollar on the black market on Friday, according to Abokifx.com.

Retailers of goods such as clothes and electronic­s increase prices even as demand drops, citing expensive dollars they need for imports.

Obinna Isaac, who works in a shop that sells suits in the capital, said his boss had not travelled to Turkey to buy stock, like he used to do, in months.

“People are no longer buying new suits to go to parties or job interviews,” Isaac said.

The government forecasts an increase in the price of oil and stability in the crude-producing Niger River delta will boost output and help the economy recover.

Legislator­s are scheduled to approve this year’s spending plans next month. This 7.3 trillion naira budget will be 20 percent more than last year, with a deficit of 2.36trln naira.

Ultimately, Nigeria’s economic recovery “depends on how much they can do to reduce the deficit, how soon they can start rolling out the budget, and stability in the Niger Delta,” Teneo’s Cheto said. – Bloomberg

 ?? PHOTO: REUTERS ?? A trader changes dollars for naira at a currency exchange store in Lagos, Nigeria. The currency’s drop in value and the 30 percent surcharge on the black market exchange circuit is hurting locals, particular­ly traders.
PHOTO: REUTERS A trader changes dollars for naira at a currency exchange store in Lagos, Nigeria. The currency’s drop in value and the 30 percent surcharge on the black market exchange circuit is hurting locals, particular­ly traders.
 ?? FILE SIMPHIWE MBOKAZI ?? A sugarcane farm at Nqutshini in KwaZulu-Natal.
FILE SIMPHIWE MBOKAZI A sugarcane farm at Nqutshini in KwaZulu-Natal.

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