LAGOS, Nigeria (VOICE OF NAIJA)- With most essential commodities priced out of the reach of the common man, poverty has become the metaphor of existence for most Nigerians.
This scenario is playing out even now as prices of commodities continue to hit the rooftop as Nigerians groan as the biting credit crunch has rendered the economy almost prostrate.
Initially, the argument in some quarters was that the spike in the foreign exchange rate was largely responsible for the chain of reactions including the free fall of the naira which further exacerbated the cost of goods and services.
The naira, which exchanged for between N1,150 and N1,180 to the dollar as of December 31, 2023, crashed to N1,400 in January and further depreciated at the black market to N1,950 in mid-February with many speculating that things could worsen, in what economic pundits described as a total run on the economy at the time.
Interestingly, the volatility of the naira was halted by the middle of March following a raft of policy initiatives by the apex bank to improve the transparency and inflows of the FX market.
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Giving fresh insights on the good fortune of the naira against the dollar, President of Association of Bureaux de Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, said aside monetary policy tightening that led to interest rate hike and more investment in government instruments and the clearance of $7 billion forex backlog, the recall of the BDCs significantly boosted dollar liquidity at the retail end of the forex market.
However, indications are that across major markets, chain stores and retail outlets in parts of Lagos and other parts of the country revealed that the prices of major commodities are yet to reflect the gains of the dollar crash.
The prices of locally sourced materials remain high if not over the rooftops.
The Consumer Price Index (CPI) in Nigeria, according to the National Bureau of Statistics (NBS) increased to 681.40 points in February from 660.80 points in January of 2024. Consumer Price Index CPI in Nigeria averaged 151.95 points from 1995 until 2024, reaching an all-time high of 681.40 points in February of 2024 and a record low of 14.36 points in January of 1995. The CPI measures the changes in the cost of a basket of goods and services consumed by the average urban household.
Independent checks on NBS website further showed that the food inflation rate in February 2024 stood at 37.92% on a year-on-year basis, which was 13.57% points higher compared to the rate recorded in February 2023 (24.35%). The rise in food inflation on a year-on-year basis was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, fish, oil and fat, meat, fruit, coffee, tea, and cocoa.
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On a month-on-month basis, the food inflation rate in February 2024 was 3.79% or an increase of 0.58% over the rate recorded in January 2024 (3.21%). The rise in the food inflation on a Month-on-Month basis was caused by increase in the average prices of bread and cereals, potatoes, yam and other tubers, fish, coffee, tea and cocoa.
The average annual rate of food inflation for the twelve months ending February 2024 over the previous twelve-month average was 30.07%, which was a 7.95% points increase from the average annual rate of change recorded in February 2023(22.12%).
Besides, the “All items less farm produces and energy” or Core inflation, which excludes the prices of volatile agricultural produces and energy stood at 25.13% in February 2024 on a year-on-year basis; up by 6.76% when compared to the 18.37% recorded in February 2023. The highest increases were recorded in prices of passenger transport by road, actual and imputed rentals for housing, medical services, pharmaceutical products, etc.
On a month-on-month basis, the Core Inflation rate was 2.17% in February 2024. It stood at 2.24% in January 2024, a decline of 0.07%. 16.75% recorded in February 2023.
The prices of perishable agricultural produce such as vegetable crops, grains, maize, wheat, bread, beverages, and fizzy drinks have shot up astronomically.
Ideally, if the naira is firming up, the prices of all goods should come down and should show the increase in the strength and purchasing power of the naira.
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Government should create an enabling environment so that we can increase our productive capacity locally. When we do this, then most of the products we are even importing we may not need to import them again when we produce our own locally. Government should also be able to engage manufacturers of those imported goods to come and have their presence in the country. There is a market in Nigeria. I remember when the president first assumed office, he was going around the globe across different countries asking them to come and invest in Nigeria. To create an enabling environment, security is the number one thing that the government should put in place.
Besides, it should provide infrastructure such as good roads, electricity, good healthcare system, and all the rest. These are parts of the enabling environment that would make people come and invest in the country.
It is also heartwarming to note that the federal government has outlined its strategic plan to counter the challenges posed by excess liquidity in the financial system, curb inflation and stabilise the economy.
Addressing a press briefing at the ongoing Spring Meetings of the International Monetary Fund (IMF) and World Bank in Washington DC on Friday, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, confirmed the administration’s commitment to tackling the issue of surplus money circulating within the economy, stating, “We are determined to pin down Ways and Means to alleviate the pressure of excess money in the system.”
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This measure, he explained, is aimed at facilitating a collaborative effort between fiscal and monetary authorities to reduce inflationary pressures and stabilise the exchange rate.
“We need to borrow less and focus more on domestic resource mobilisation,” Mr Edun emphasised.
He stressed the urgency of improving tax revenue, citing Nigeria’s tax-to-GDP ratio of 10 percent as insufficient compared to regional averages, signaling the need for comprehensive reforms.
“At 10 percent to GDP, what should I say? It would appear as if some people are not paying their taxes,” Mr Edun remarked, underscoring the importance of leveraging technology and policy reforms to optimise tax collection efficiency.
The government, he said, is working with organisations such as the African Development Bank to create agro clusters to increase food production nationwide.
Can Nigerians bank on Mr. Edun’s assurances that things would get better soon or should it be accepted as mere platitudes? Time will tell!