Living standard worsens in Nigeria on rising inflation, unemployment

THE STANDARD OF LIVING of Nigerians will be worse off if attention is not paid to taming rising inflation which continued its steadily acceleration and hit its highest level at 18.17 per cent since January 2017, say analysts who have examined the inflation report released by the National Bureau of Statistics (NBS).

Major consequences of the unhealthy number include the weakening naira, high cost and standard of living for the common Nigerian in the face of insecurity, rising rate of unemployment, as well as, the inability of some states to implement the N30,000 minimum wage, while others are yet to fulfil their obligations regarding payment of salaries, pensions, among others.

The latest report on inflation published by the statistics office shows that the rise in headline numbers can be attributed to increases across all the 12 classifications of individual consumption by purpose, and as also seen on the supply-side constriction, triggered by the ongoing pandemic, worsening state of insecurity in the country, particularly in food-producing areas, limiting expected outcomes and further fuelling food inflation, which remains a major driver behind the acceleration of the headline figure.

Food inflation rose by 22.95 per cent in March 2021 as a result of increases in the prices of bread and cereals, potatoes, yam and other tubers, meat, vegetable, fish, oils and fats and fruits.

However, the prices of poultry products in Nigeria are at their highest levels with findings revealing that a kilogramme of chicken that was previously sold at N800 is now sold at N2000, while the price of a

crate of eggs has doubled to N1500. Also, the upward adjustment in electricity tariff, among others, and the hike in the price of premium motor spirit (PMS) or petrol, shows that the average price paid by consumers increased by 18.76 per cent year on year to N172.68 per litre in March 2021. States with the highest average price of petrol were Lagos (N200.87 per litre), Ebonyi (N184.17 per litre) and Niger (N183.50 per litre) states, respectively.

A cross-section of analysts who shared their thoughts on this development also points to the recent chain of events around the economy, including the weakening of the local currency, which has led to the waning of the purchasing power of the naira, as a cause.

According to the analysts, the dangerous combination of higher inflation and a strain in government’s fiscal position, which puts them in a position not to be able to pay the minimum wage, could spur an increase in social vices like armed robbery, kidnapping, drug abuse and cybercrime.

“Essentially, the consequences of a higher inflation rate are almost the same for the unemployed Nigerian, fixed income earners such as pensioners, savers and even those whose wage or salary are sticky upward (such as the minimum wage earners). And the consequence is that the real value of their income will be eroded. It is even worse because the major driver of headline inflation is food, a basic human necessity which the average Nigerian will spend a chunk of his wage on. Thus, food price is currently over 22 per cent.

“The standard of living of Nigerians will be worse off if attention is not paid to taming the rising inflation. I believe this will be the focus of the next MPC meeting and we may well see an upward adjustment in the MPR even though we know that Nigeria inflation is cost-push and not necessarily demand-pull,” they said.

Ijezie Okwudili, a chartered accountant and founder of I & I Investment Limited, in a note to Business A.M. in response to questions, said the average Nigerian is pauperized by the economic downturn, and it would appear that the governments at all tiers are oblivious of the sufferings in the land, adding that many of the white elephant projects being undertaken at this moment of economic depression give the impression that the governments are not in tune with the reality of a huge economic problem.

According to him, “Like I predicted mid-2020, Nigeria is slumping into an Economic Depression. With an inflation rate of 18.3 per cent and an unemployment rate of 33 per cent, the minimum wage of N30,000 (Thirty thousand Naira only) can no longer take the workers home, as it were. That’s N1,000 (One thousand Naira only) per day and about $2.00 per day.

“That’s really appalling as there is an urgent need for the governments, at federal, state and local governments, to commence the upgrade of this minimum wage, to take cognizance of the reality on the ground. For example, the $1.5 billion set aside to rehabilitate the Port Harcourt Refinery is pure economic waste. This money should be channelled to other pressing economic activity that will attract

growth,” he said.

Considering the fragile state of Nigeria’s economy, the official thinking at the Central Bank of Nigeria is that the pressures will ease with the closing of the negative output gap on the pick-up in economic activity. Nevertheless, the NBS commentary notes that among the highest price rises in March were those of passenger transport by road and air, motor vehicles, repairs and vehicle spares. All these items are part of the transport category, which has a 6.5 per cent weighting in the basket. Its month on month inflation has been above 1.2 per cent since November and therefore well above the rate prevailing for the core measure, which still tells on the pocket of the average Nigerian.

Before now, Quadri Olaleye, President of the Trade Union Congress of Nigeria (TUC), had revealed that almost 50 per cent of the states in Nigeria are yet to commence the payment of the stipulated minimum wage, listing them as Benue, Cross River, Ekiti, only implemented levels one to six of the policy, with backlogs of arrears on promotion; while Enugu, Gombe, Imo, Kogi, Kwara, Nasarawa, Ogun, Oyo, Plateau, Rivers, Taraba, Kano, and Zamfara states, all have huge remittance on deductions. Currently, some of these states also rank high on the log of states with the highest rates of inflation, going by NBS data.

The analysts have also stated that if the current challenge of insecurity nationwide is not controlled, inflation will spiral in forthcoming months. To buttress the argument, it has become clear that herdsmen activities herdsmen are constraining farmers from going to their farms; Boko Haram, especially in the North East Region is limiting farmers from going to the farms to harvest their produce. Now that the planting season is near, it is the same scenario playing out.

In the North West region of the country, it is a case of banditry, as farmers hardly visit their farms unless they pay taxes to these bandits, before access can be given to them.

Consequently, transportation of farm produce is equally a problem, as incidences of kidnappings have made transporters to hike fares. Also, the ever-rising cost of petrol and diesel has an inflationary tendency, analysts say.

But besides these, unstable power (electricity) supply has made many factories rely on petrol and diesel to power their machines with the resultant pressure on cost of their products, coupled with the triple rise in electricity charges by the distribution companies in the past six months, the inflation rate can only get worse going forward, analysts maintained.