By OKEY ONYENWEAKU
and EMEKA EJERE
With inflation hitting the roof tops at 17.33 per cent, the Easter celebrations of Christians and many others in the country has largely been without a lot of the brisk and generous shopping rounds that characterise the season. This analysts say, is because the season has also coincided with a time in which the prices of food and other consumables have soared beyond the reach of the average Nigerian family. The misery, the frustration, the stark poverty are almost palpable. Many homes can barely make ends meet as the soaring school fees, house rents and other basic necessities of life are difficult to come by. Average Nigerian families lament the excruciating pains and hunger pangs they are going through this season. “We can no longer buy food whose prices have tripled in recent times’’, a neighbor was overhead telling his co-tenant in a Lagos suburb recently.
Another said, ‘we will have to make do with whatever we have this season. I will let my children understand that the situation is not the fault of their dad but that of the country. We don’t understand where this government is taking us.’
This appears to be the experience of many Nigerians whose incomes have been deeply eroded as the naira loses value by the day. Years back, it was a little easier for parents to shield their children from the harsh economic realities. But these days parents are constantly educating their children on the harsh realities and why they are suffering. All these challenges have been heaped on the continuing rise in inflation which has not only compounded the hardship of Nigerians by eroding their purchasing power but also caused widespread job losses and pay cuts as sundry strategies are being deployed by firms to remain in business.
The most recent figures published by the National Bureau of Statistics (NBS) showed a rise in the inflation rate for the 18th consecutive month. While headline inflation rose from 17.33 per cent in December 2020 to 16.47 per cent, food inflation rose to 21.9 per cent in February as against the 20.57 percent it was in February 2021.
Upon assuming office for the second term as Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele had declared that monetary policy measures embarked upon by the CBN “in the next five years would be geared towards containing inflationary pressures and supporting improved productivity in the agricultural and manufacturing sectors of the economy.”
To achieve its single digits rate target, the CBN had planned to, among other things, work with other stakeholders in the economy to bring down the cost of food items, which it said, has considerable weight in the Consumer Price Index (CPI) basket.
However, President Muhammadu Buhari closed land borders with Benin, Niger, Chad and Cameroon in August 2019 to prevent food smuggling and encourage local agricultural production. Thus, food inflation continued to climb with Nigerian farmers unable to keep up with domestic demand. The government partially reopened the borders in December 2020, but trade flows are yet to return to normal.
Also, since September 2020, the President’s order to restrict dollar access for food and fertilizer imports has driven traders to the parallel market for foreign exchange, where they pay a lot more.
The move aimed at boosting local production has raised costs for importers and added to upward pressure on food prices. Also a slew of attacks on Nigeria farmers by Fulani herdsmen and bandits have pushed down food reserves, raising the price of key staples, amid concerns about looming famine.
Annual inflation has been above the 9% top of the CBN’s target range since 2015. According to a December publication of the International Monetary Fund (IMF), the rate could remain in double-digits unless authorities reform monetary policy to focus on price stability.
Records show that with Nigeria missing its single-digit inflation target of between six and nine percent set for between 2017 and 2019, the only years when the CBN was spot on in its inflation forecasts were 2004, 2006, 2010 and 2014.
The last time Nigeria enjoyed single-digit inflation was in the year 2015, after which the rate moved up dramatically from 9.5 per cent sometime in 2015 to 18.5 per cent in 2016 when the economy slipped into recession.
However, Emefiele’s CBN was able to crash the high inflationary rate triggered by an over 60 per cent drop in crude oil prices between 2014 and 2016. Nigeria, the largest economy in Africa depends on crude oil revenues for close to 86 per cent of its foreign exchange earnings and over 60 per cent of government expenditure.
Proactive measures taken by the CBN to raise interest rates in July 2016 brought down inflation from 17.6 per cent to the region of 11.22 per cent as at June, 2019 shortly before the closure of borders in August. The figure recorded in June was 0.18 per cent points lower than the rate recorded in May 2019 (11.40) per cent.
On month-on-month basis, the headline index increased by 1.07 per cent in June 2019, a rate 0.04 per cent lower than the rate recorded in May 2019 (1.11 per cent).
The percentage change in the average composite CPI for the twelve months period ending June 2019 over the average of the CPI for the previous twelve months period was 11.29 per cent, similar to the 11.29 per cent recorded in May 2019.
The urban inflation rate increased by 11.61 percent (year-on-year) in June 2019 from 11.76 per cent recorded in May 2019, while the rural inflation rate increased by 10.87 per cent in June 2019 from 11.08 per cent in May 2019.
On a month-on-month basis, the urban index rose by 1.10 per cent in June 2019, up by 0.05 from 1.15 per cent recorded in May 2019, while the rural index also rose by 1.05 per cent in June 2019, up by 0.02 from the rate recorded in May 2019 (1.07) per cent.
The corresponding twelve-month year-on-year average percentage change for the urban index was 11.65 per cent in June 2019. This is less than 11.66 per cent reported in May 2019, while the corresponding rural inflation rate in June 2019 was 10.99 per cent compared to 10.98 per cent recorded in May 2019.
January 2021 state-by-state review
According to a report by Proshare, in January 2021, headline inflation on a Year-on-Year basis was highest in Kogi (21.38%), Oyo (20.17%), and Bauchi (19.52%), while Kwara (13.96%), Abuja (12.96%), and Cross River (12.22%) recorded the slowest rise in headline year on year inflation.
On a month-on-month basis, however, in January 2021 all items inflation was highest in Oyo (4.28%), Ebonyi (3.95%), and Lagos (3.33%), while Abuja, Edo, and Cross River recorded price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).
The report further revealed that in January 2021, food inflation on a year-on-year basis was highest in Kogi (26.64%), Oyo (23.69%), and Rivers (23.49%), while Ondo (17.20%), Abuja (16.73%), and Bauchi (16.37%) recorded the slowest rise.
On a month-on-month basis, however, January 2021 food inflation was highest in Oyo (4.47%), Lagos (3.86%), and Rivers (3.11%), while Akwa Ibom (0.25%) and Bayelsa (0.13%) recorded the slowest rise with Edo recording price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).
The disturbing reality of Nigeria’s emergent food crisis was poignantly brought home recently by the chairman of the Presidential Economic Advisory Council, Dr. Doyin Salami.
He revealed during the national economic outlook for 2021 organised by the Chartered Institute of Bankers of Nigeria that the country spent a whopping N1.85 trillion to import food for nine months during the closure of its land border coupled with the declining output of agricultural produce by farmers who hardly go to farm because of insecurity.
Inflation, will “certainly remain elevated over the medium term, and may actually rise in 2021,” John Ashbourne, emerging markets economist at Fitch Solutions in London, reportedly said. “Until the government abandons its efforts to cut down on food imports, we are unlikely to see a real change.”
He sees inflation averaging about 16.4% this year, with the danger that food inflation could spread to other categories if the central bank loosens its grip on the naira.
“The average Nigerian household spends around 57% of its income on food, and the figure is substantially higher for the 83 million Nigerians who live below the poverty line”, says William Attwell, senior country risk analyst at Fitch Solutions in London.
Reacting to the situation, an economic analyst, Oluwadunsin Deinde-Sanya, noted that the scary thing about inflation is how it is steadily on the upswing without serious efforts to check it.
He said, “Just this week, my family wanted to buy iron rods for a project we’re working on. After making inquiries from someone who got it in September, we went to the market just to discover that one iron that used to cost N6,000 in September is now N10,000. That’s about a 40% increase in just five months.
“I now pay N200 as transportation fare for a journey that, just last year, was N100. Going out in Lagos is an extreme sport, when you think of the thousands of Naira you will spend when you step out of your house, you will just sit down quietly and enjoy your Netflix. But even as I write this, I recognise that being able to watch Netflix is a privilege, millions of Nigerians do not have.
“It is bad enough that the minimum wage is not increasing and even now, many states are struggling to pay up, pensioners are not getting their pensions, salaries are not increasing, young people are not getting jobs, still, prices of goods and services are shooting up fast. Should we talk about housing in Nigeria, especially in Lagos and Abuja, he queried?
He added, “To worsen it, many government policies and economic models are shutting down businesses and plunging more people into poverty, and the silence of Nigerians is enabling this incessant cataloging of economic mistakes and failures.”
Mrs. Eunice Sunday, shared a similar experience she had at Oshodi Market in Lagos: “I go to Oshodi market to buy food products because I usually get good bargains there. But my dear, I went to market this time with N20,000 to buy food products, and the money could hardly pay for what I needed. What is Nigeria turning to? She wondered.
For the development economist, Barrister Fred Nzeako, until serious measures are taken to enhance the nation’s industrial production capacity, Nigeria will continue to be a highly import-dependent economy and this will continue to put pressure on the naira.
“When foreign exchange consumption is reduced, the value of naira will shore up”, Nzeako said. “And then it will translate to improved productivity and you will now see that in the standard of living of the people.”
Analysts believe that if nothing is done to jump start the economy, and very quickly too at that, gloomy days will continue to lurk around. And that to say the least, is clearly not the road to take.