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In Nigeria, Africa’s largest economy with a gross domestic product (GDP) of $441.5 billion in 2021, the economy is buckling under inflationary pressure, with economic analysts saying over seven million Nigerians have been plunged into poverty as rising prices continuously diminish already meagre incomes.
Nigeria’s inflation rate has been on an upward trajectory since February 2022 when it recorded 15.70 percent, from 15.60 percent in January. It rose to 15.92 percent in March, 16.82 percent in April, 17.71 percent in May, 18.60 percent in June, 19.64 percent in July, 20.52 percent in August, before hitting a 17-year high of 20.77 percent in September, according to data from the state-run National Bureau of Statistics.
Nigeria’s headline inflation further accelerated for the ninth month in a row in October, reaching a new 17-year high of 21.09 percent, NBS said in its latest Consumer Price Index (CPI) report released last week.
The report, which measures the rate of changes in prices of goods and services, showed that the inflation figure was up 0.32 percentage points against 20.77 percent recorded in September 2022. It was also 5.09 percent higher year-on-year compared to 15.99 percent posted in the corresponding period of 2021.
Food inflation also continued its upward swing to 23.72 percent in the month under review from 18.34 percent in the corresponding month of 2021, while core inflation rose to 17.76 percent in October 2022, up from 17.6 percent recorded in the previous month.
NBS attributed the sharp rise in the prices of goods and services to a disruption in the supply of goods and services following flooding across some parts of the country, which disrupted businesses, destroyed farmlands/crop production and left thousands homeless, sharp rise in importation expenditure due to persistent currency depreciation, and a continuous rise in cost of production across various chains.
Commenting on the latest inflation figures, Muda Yusuf, chief executive officer, Centre for Promotion of Private Enterprise (CPPE), in a statement released by CPPE, said mounting inflationary pressures have negative consequences for the economy, including weakening of purchasing power of citizens as real incomes are eroded, increasing poverty incidence, escalation of production costs, which negatively impact profitability, erosion of shareholder value in many businesses, weakening of investors’ confidence, and declines in manufacturing capacity utilisation.
A survey by Business A.M. shows that these impacts are being felt by businesses and consumers in the country who are groaning under the crushing weight of escalating prices in the market places where money is exchanged for basic commodities and services.
Ndubuisi Orji, chief executive officer, ESG Business Group, an agro-commodities firm in Mgbidi, Imo State, said the surging inflation has continuously affected his business, leading to a large reduction in customer patronage.
“High inflation has reduced the purchasing power of buyers. For example, a businessman that usually buys 100 bags of rice may not be able to afford that again because of the escalating price of rice and increased expenses,” Orji told Business A.M. in a telephone interview.
He lamented that small-scale businesses and startups such as his have suffered more from the situation, given that inflation is a major hindrance to the growth of many small businesses.
Golden Ubachukwu, chief executive officer, Build Golden Construction Company (BGCC) in Port Harcourt, Rivers State, noted that the inflation has affected not only his business, but the entire building industry. He said one of the major problems facing building contractors is the rising cost of materials in the market.
“You do a bidding for a job, and it comes out to about N1 million, and the next three to four months down the line, that same estimate will be double the amount, or sometimes 60-70 percent higher than the initial amount,” he said.
Ubachukwu also explained that the inflation figures have impacted the naira rate against the dollar as Nigeria is a net importer of basic construction materials including windows, doors, kitchen sets, plumbing equipment, and so on.
“When the dollar goes higher, the cost of materials in the market goes higher, and it becomes difficult for contractors to purchase them. Inflation is really a big problem and I can tell you it is not just our industry that is affected,” he said.
A visit to Ladipo Market, Nigeria’s largest auto parts market, showed that traders and consumers have been deeply affected by the galloping prices in the landing cost of automotive spare parts, volatility in exchange rates of the naira against the dollar, high import duties, and other logistics. This, dealers noted, has dealt a heavy blow on purchasing power of consumers, depriving the dealers of significant profits.
“The current economic situation of the country shows that things are on the high side. We had auto parts which sold at the average of N8,000 as at last year, but the current market price has witnessed close to 100 percent rise in the prices of the same spare parts which currently go for N15,000 and above. This has affected not just me, but every other dealer in the market,” Chukwudi Nnamani, an auto spare parts dealer, said.
In Okumbiri, Bayelsa State, Ebi Success, a primary school teacher, lamented that the prices of goods in the market are escalating daily.
“Prices of things keep increasing in such a way that if you go to the market and buy something worth N500 today, when you go to get the same thing the next day, it will be sold for N1,000,” Success said.
“The worst is that the flood effect also made transportation cost high. In fact, the transportation cost to where I work is now N3,000 compared to the former price of N1,500, and it really gives me serious concern,” she lamented.
Success also bemoaned the increase in food prices, saying it has led to the termination of a monthly thrift contribution she was engaged in.
“Before now, we contributed N3,000 every month for buying foodstuff, but now, a bag of rice is N48,000, hence we can’t go ahead with that in this period of high inflation,” she said.
At 360 Bakery in Ajao Estate, Lagos, a loaf of bread which previously sold for N300 has jumped to N700, while the sardine and coconut bread varieties which previously sold for N400 has risen to N800 and N900, respectively. One of the bakers who chose to speak under anonymity disclosed that the cost of production ingredients, notably flour and sugar, has skyrocketed and it would be almost impossible for them to make any profit without increasing the prices of bread.
Rukayat Fadeyibi, an egg trader at the Oja-Oba Market in AdoEkiti, Ekiti State, told Business A.M. that a crate of egg, which sold for N1,200 as of October 2021, is currently about N2,000 and above depending on the size.
“My customers are not happy about the current price and some of them have been complaining, thinking the egg sellers are intentionally raising the cost of eggs,” Fadeyibi said.
Nigeria, according to the United Nation’s latest World Population Prospects 2022, is the sixth most populous country in the world, with its 216 million projected population estimated to contain 2.7 percent of the global population. With many Nigerians continually finding it difficult to defend their bellies against the pervading food inflation woes while uncertainties about other commodities persist, it is evident that the country is in a critical situation that necessitates a crucial intervention from the government and stakeholders involved in the production and supply sectors, analysts warn.
Africanfarmer Mogaji, chief executive officer, FarmCredit, an agribusiness investment platform, said the recurrent food inflation crisis is a cause for concern to every Nigerian irrespective of social status.
According to the food consultant, challenges such as climate change, insurgency, among other factors, have dented production in the agricultural sector.
Mogaji, in a statement made available to Business A.M., accused food trade unions and middlemen in the food distribution sector of exhibiting unnecessary authority in their role as linkages between the farmers (food producers) and marketers. The middlemen and trade unions, he said, are more concerned about personal gains in contrast to harnessing fluid relationships with the value chain in terms of producers and consumers.
“Anything they do affects the farmers. If the farmers are discouraged, their resultant actions could lead to food insecurity and if the consumers don’t get the food to buy, it leads to frustration and unrest,” he said.
Speaking on the way forward, Mogaji noted that the Anchor Borrowers’ Programme facilitated by the Central Bank of Nigeria (CBN) has been effective based on the original design but going forward, the project initiative needs to be reappraised and scaled lower to benefit the farmers who need it the most. He also stressed that it is mostly people with large farmer networks that really have access to the funding whereas it is needed to encompass small, medium and large-scale farmers in such a way that it can trickle down to the average farmer, especially in situations where many of the farmers are in dire need of farm implements and storage facilities to boost food production level.
He added that the policies of the programme need to evolve and embrace developing trends and also extend to other sectors such as the long-term crops, including coconut and oil palm.
“Presently, Nigeria’s agricultural policies are more potential than structural and for the agricultural sector to achieve sustainability, they should be more developed and long-term structured,” he said.
Ademola Odesanya, founder, Agric-Ville Ventures, an organic breeding farm for poultry birds, said the hike in the prices of chickens, eggs and other poultry derivatives is a result of a dip in supply and high cost of maize and soybean which are notably the most basic ingredients in the production of chicken feeds.
Explaining how this challenge has affected the production capacity of many poultry farmers, Odesanya said the cost of operating a poultry farm has doubled and many workers and farmers have been forced to look for alternative sources of livelihood because even the prices at which the chickens and eggs are sold to the consumers are not enough to compensate for the cost of production and sustaining their businesses.
He suggested for the government to adopt more strategic, innovative and aggressive measures and a comprehensive long-term economic policy to ensure food security rather than keep implementing archaic and temporary agricultural projects which never yield the desired results.
There is also the need for the government to take urgent steps to tackle the challenges of inflation, especially on the supply side of the economy, said Yusuf of CPPE, who advised the federal government to review its tariff policies by granting concessionary import duty on intermediate products as a way of addressing the inflationary effects on producers, individuals and other key players.
“Tackling inflation requires urgent government intervention to address the challenges bedevilling the supply side of the economy, addressing production and productivity constraints, fixing the dysfunctional forex policy, and institution of fiscal reforms to curb escalating deficit spending,” he said.