Economists define inflation as the rise in the general price level over a period of time. In Nigeria, inflation has remained double-digit (over nine per cent) since 2015 when Nigeria’s President, Major General Muhammadu Buhari (retd), came to power.
The country has survived two recessions, with the former induced by a foreign exchange crisis and the latter, COVID-19.
In June 2022, Nigeria’s inflation rate recorded a seventh consecutive monthly rise to 18.6 percent, representing a 0.9 percent point rise from the 17.71 percent reported in May 2022, according to the National Bureau of Statistics.
With the spiralling inflation, the hardest hit is the worker whose wages have remained the same amid rising prices.
The prices of commodities from petrol to biscuits have risen dramatically. Petrol prices have increased officially from N162-N165 to N175 and above per litre, but the product sells between N200 and N220 in Kogi, Edo, Anambra, Kano, among other states.
“Nigerian workers are challenged because sending our workers to school has become almost impossible,” said Abu Halima, an Abuja-based civil servant.
“Even in those schools, prices of items have risen so fast. We, the parents, are the ones bearing the burden,” she told THE Punch.
Rents in Abuja, Lagos and other major cities in Nigeria are responding to the rising inflation. A two bed-room flat in Kubwa, Zuba, and Gwagwalada – which are classified as the middle- and lower-class areas –cost as high as N600,000 to N800,000 today.
In Lagos, the same size of flat in Oshodi, Ojuelegba, Ilasamaja, among others, also cost as much as N500 to N800,000.
“My landlord has increased our house rent from N500, 000 to N700,000. My husband and I are salary earners and we are already disorganised,” said Lynda Akagba, who lives in Karu, an urban area in Abuja, which is closely knit with Nasarawa State.
Reports say that Nigerians spend 60 per cent of their income on food. Food inflation rose to a terrifying 20.6 per cent in June from the 19.5 per cent recorded in May.
The products responsible for the hike in inflation were bread, yam, rice, beans, oil, and garri, staple food products.
Workers still buy from the same market as the rich but are the worst hit.
Samson Udeh, who works in a private sector in Lagos, said with his N170,000 salary, he could hardly achieve anything other than food.
“By the time I buy foodstuffs, all my salary will be gone, and I will become a beggar,” he said.
“Except you are stealing, you cannot achieve anything with that salary,” he noted.
A civil servant working in the College of Medicine, University Teaching hospital, Ibadan, Mrs. Ajamu Bosede narrated her ordeal of living on a salary of N85,000 with expenses of over N100,000 monthly.
“Formerly, before the minimum wage increase, my salary was 62,000 and I still made some little savings, but now, it is N85,000 after tax and pension have been removed. The balance is N75,000. In a month, feeding is over 100,000, transportation 2,000 daily.
“All of these are without a house rent bill, and I will also take care of my health and my kids. It has not been easy, to be honest. The salary we are earning is just for transportation, it is not worth it at all.”
Workers are not the only ones that are feeling the heat. Employers are also in a mess.
Ike Ibeabuchi, who manages a manufacturing outfit in Enugu, said he had had to reduce the size of his workforce to be able to meet salary obligations of his workers.
“Reducing staff strength from 17 to 11 is not an easy decision, but the economy is not in a proper shape.”
The issue is also affecting traders and sellers.
A trader in foodstuff in Oyo State, Mrs. Fatima Edwards, said that the cost of food had taken a toll on her business as customers lamented the inconsistencies in price.
“Business has been quite dull. My customers only buy their most pressing food products. These days, I have to frequently call my suppliers in that market to stay updated on the price changes.
“Three days ago, I bought a pack of spaghetti for N8,000, today, my supplier told me it’s now N8,200. This is a product that I sold for N7000 last week.”
Six months to the end of President Mohammadu Buhari’s tenure, the Nigerian economy bleeds with debts, insecurity, financial crunch, and rising inflation. A report shows Nigeria’s total debt stock rose to N41.6 trillion in the first quarter of 2022, representing a N2.05trn increase compared to N39.56trn as of December 2021.
According to the quarterly public debt portfolio report released by the Debt Management Office, Nigeria’s total public debt to GDP at 23.27per cent was below the self-imposed limit of 40 per cent.
But these are critical times which have left many in penury and frustration. Besides the harrowing experience of epileptic power supply, 90 million Nigerians are plunged into darkness, while 78 per cent struggle with less than 12 hours of power.
Energy prices have continued to skyrocket with no hope of relenting.
Labour agitating and naira devaluation
As the economy wobbles, the reality for Nigerian workers has degenerated into a horror story. In 2018, the National Labour Congress and Trade Union Congress demanded an upper review of salaries to mitigate the effect of the economic situation. By April 2019, the Federal Government had yielded to NLC’s demand and signed the N30,000 minimum wage to serve as a gauge for workers in Nigeria.
However, with rising inflation, this meagre wage does not have much value in the wake of the exchange rate, energy prices, and poverty rate in 2022.
For example, the N30,0000 minimum wage took effect when the exchange rate was N362 to a dollar, and inflation stood at 11.6 percent. Now the naira has exchanged at different rates from N600 and above to a dollar.
This has affected the workers and made mincemeat of their earnings.
The Russian-Ukraine war
With Russia’s invasion of Ukraine, the global economy has faced perilous times. This is because Russia and Ukraine are the big players in the supply of the global commodities. Russia, the world’s second-largest exporter of crude oil, is arguably one of the substantial producers of natural gas and clean energy globally. Crude oil is not left out of the mix, as the hovering price of $100 per barrel should be a positive score for the nation’s foreign reserves. Unfortunately, Nigeria spends all its foreign reserves importing refined crude oil and on paying subsidies. With no refineries, the cost of fuel and, especially diesel and gas, have skyrocketed.
The war has also affected the food supply chain. According to the United States Department of Agriculture, Russia is the largest exporter of durum wheat.
The Russian Grain Union stated in a report that it exported 1.26 million tonnes of wheat in May 2022, up 87per cent from 2021. The major export destinations were Nigeria, Israel, Egypt, Turkey, Iran, and Libya.
Insecurity and Bandits
Plagued by banditry, kidnappings, and internal terrorism, Nigeria has been characterised by social unrest. The clashes in the North have halted all farm activities and displaced farmers and traders.
Many farmers have been sacked and the supply chain has been disrupted in several states known as Nigeria’s food basket, leading to high food inflation in the country.
According to economic experts, the country’s minimum wage has never been on par with the inflation rate.
The Director, Research & Strategist, Chapel Hill Denham, Tajudeen Ibrahim, addressed the minimum wage from a dollar standpoint.
“So, the minimum wage is N30,000, and if we use an exchange rate of N300 to the dollar, what it means is that the minimum wage was at a point of $100. Now that the dollar is around N600, it means that in dollar terms, the minimum wage has come down to $50.
This means that the spending power of Nigerians has come down by 50 per cent within the last 3 to 5 years.”
Ibrahim said that the situation called for an urgent increase in the minimum wage, noting that, otherwise, “more Nigerians will remain in poverty in the coming quarters.”
He continued, “The outlook for the exchange rate is still weak, and bread prices have moved significantly. The summary is that many Nigerians are suffering silently.
There are two ways to fix this problem. First, the government should consider investing in infrastructure to ensure the cost of production decreases significantly. This approach is the best because it is a long-term solution. The second approach is to increase the minimum wage.”
The Deputy President of the Lagos Chamber of Commerce, Gabriel Idahosa, noted that the minimum wage system was suffering from a multi-standardisation of living in all 36 states.
“ The minimum wage you need to survive in Lagos differs from that of Borno State. So, that’s what makes the situation complicated in Nigeria. In many federal jurisdictions, it’s the state that fixes the minimum wage based on its economic situation and cost of living in the state.
“So when we try to fix the minimum wage for the whole of Nigeria, we always need to work on it. There’s no time in the last 20 years that the wage has been enough. In some countries, their minimum wage is indexed towards inflation.”
In a recent statement, the Director-General, Nigeria Employers’ Consultative Association, NECA, Mr. Wale Oyerinde, clamoured for a holistic approach to resolving the economic crisis.
“Economic interventions aimed at improving living standards (to stimulate consumption) and enterprise sustainability (to promote job creation) should be implemented. While forex scarcity persists, allocation of the available forex to manufacturing and other productive sectors of the economy should be given priority. There is no better time for the government to reappraise current economic policies and deepen its engagement with the Organized Private Sector. While the government’s effort to salvage the economy is commendable, there is, however, a more holistic approach is needed to resuscitate the stuttering economy.”