Nigerians fight for economic balance as recession beckons
95.7 million others at risk of poverty by 2022
The last three months of the lockdown imposed to check the spread of the novel coronavirus have been hectic for most Nigerians, as they struggle to find a balance between dipping incomes and rising inflation manifest in exorbitant prices of goods amid weak currency.
While earnings sustain a sliding profile, the reverse has been the case for food items, drugs, transportation, utilities, among others in a year of the implementation of a new Value Added Tax (VAT) regime of 7.5 per cent, up from an earlier figure of five per cent.
The falling revenue has also tripled dependents in many homes.
The latest data from the National Bureau of Statistics (NBS) showed that remittances from relatives between 2018 and 2019 amounted to N84,741.
Of the sum, N62,492 were from domestic sources, as the balance came from foreign outlets, according to the Nigeria Living Standards Survey (NLSS). The realities are not different today, it noted.
Similarly, local manufacturers have had to pass on cost to consumers, as importation of critical raw materials for production lingers, owing to scarcity of foreign exchange.
Indeed, the devaluation of the naira for a unified exchange rate has further reduced the purchasing power of the citizens, thus pushing more below the poverty line.
With the legal tender exchanging for N460 to a $1 at the weekend, as against the N360/$1 it traded on March 9 at the parallel market, the PricewaterhouseCoopers (PwC) Nigeria has predicted that the inflation rate in the most populous black nation could continue its upward trend based on “demand and supply shocks” from the COVID-19 pandemic.
It pointed out that the inflation outlook for the rest of the year would be influenced by two factors – the elevated base effect – and the waning household incomes.
The nation’s inflation rate rose for a ninth consecutive month to 12.40 per cent in May 2020, and several analysts, immediately, projected that the development would subsist for June.
In the same vein, a most recent Central Bank of Nigeria (CBN) study found that businesses had developed a pessimistic disposition to the national economy for June, with an overall confidence index (CI) of -24.3 index points, just as a similar exercise by the Lagos Chamber of Commerce and Industry (LCCI) indicated that 83 per cent of business owners may have slashed salaries and downsized their workforce.
Even as the World Bank warned of the imminence of the worst recession in almost 40 years, the International Monetary Fund (IMF) has urged Nigeria to hold back its aggressive tax drive on account of the adverse impact of the virus on commerce and families.
The global lender anticipates that the ravaging blow of the disease would throw 95.7 million Nigerians into penury by 2022
“With real per capita GDP growth forecast to be negative in all sectors in 2020, poverty will deepen for the current poor, while those households that were just above the poverty line prior to the COVID-19 crisis, will fall into poverty,” the Bretton Woods institution submitted.
The IMF, however, advised the Federal Government to push for pro-people programmes, just as it commended the monetary policies of the CBN to cushion the effects of the scourge on the citizenry.
LCCI’s Director-General, Dr. Muda Yusuf, described rising prices as, perhaps, the worst enemy of the poor, adding that it erodes purchasing power and aggravates lack.
He, therefore, called for monetary and fiscal measures to tackle the menace.
This is even as local manufacturers urged the apex bank to ease access to foreign exchange.
Also speaking, the Director-General of Nigeria Employers’ Consultative Association (NECA), Dr. Timothy Olawale, who backed the exchange rate unification effort, stated that, “as we are in full support of shunning multiple currency practices, this we believe, has not demonstrated the true reflection of the naira in the market.”
He went on: “Nevertheless, we are wary of the implication of the sudden unification of the exchange rate to the economy at this time. We believe this will be counterproductive, as the nation depends hugely on importation of raw materials, equipment, fuels (most especially). We are sure this will imply higher cost of all imported products, with increased potential for re-introduction of subsidy regime.”