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Inflation outpaces earnings as daily realities contradict NBS data

By Gloria Nwafor
20 November 2022   |   4:00 am
With limited policy response to check spiking inflation, especially from the fiscal side, many Nigerians may be sinking into the poverty hole, worsened by rising food inflation as well as extremely weak and stagnated incomes.

A commodity market. Inset is the Finance Minister, Zainab Ahmed

With limited policy response to check spiking inflation, especially from the fiscal side, many Nigerians may be sinking into the poverty hole, worsened by rising food inflation as well as extremely weak and stagnated incomes.

For a country where most of the household goods have dollar inputs, either in the form of energy (imported diesel/petrol) or imported raw material, the monthly minimum wage is insufficient to sustain feeding alone. Earlier this year, analysts at Picodi.com, an international e-commerce firm, checked how the minimum wage rates have changed in 64 countries, including Nigeria and whether such amounts can ensure a minimum standard of living in a given country.

They discovered that Nigeria had the worst situation among 64 countries where the research was conducted, noting that basic food sufficient to meet the minimum nutrient requirements is worth 136.6 per cent of the minimum wage in Nigeria, the worst rate among the 64 countries.

• Plans To Increase Wages Undermined By Rising Budget Deficit, High OPEX By Firms<br />• Dwindling Wages Affecting Real Productivity<br />• Employers urged to remain as choice during crisis<br />• Young Employees Are Hardest Hit As Strategies Reeled Out To Stay Strong


According to them, the value of basic food products for the healthy living of an adult in a month, at the beginning of 2022, stood at N40,980, higher than the N30,000 minimum wage in Nigeria. This represents a 15.89 per cent increase compared to the beginning of 2021. Ten months after, the situation appears to have worsened, especially with the decline in the value of the Naira in recent weeks.

If the outlook for food inflation is anything to go by, as compounded by the recent floods in many parts of the country and insecurity, Nigerians may have to deal with food insecurity and increasing loss of purchasing power.

Though the roots of today’s inflation are a more complicated cocktail of several forces: from the spike in raw material, energy, and commodities prices due in large part to the Russian invasion of Ukraine, to lingering supply chain disruptions and distorted forex market, the reality of the average Nigerian is that of people living on the ledge, with direction and buffer from the government appearing to be missing.

Tracked price movement as done by the National Bureau of Statistics (NBS) appears to be dated and far from market realities as many households have seen significant spikes in daily household items, outpacing data released by the government.

For many households, rising inflation poses a significant challenge, as higher prices continue to erode the value of real wages and savings, leaving households poorer. While poorer households struggle to find a balance, wealthier households are hedging savings by leveraging the US dollar.

Notwithstanding plans by the Federal Government to adjust workers’ salaries, the reality of deficit financing and rising debts might make such a move a wishlist, just as the private sector operators struggle to sustain operations and workforce due to FX exposures and rising costs of operations.

Already, as the cost of living soars, the financial crisis is already taking a toll on employees’ mental health and well-being, thereby affecting productivity at the workplace.

Majority of them lamented that their monthly take-home pay no longer takes them home considering the high cost of commodities in the country.

Already, the price of a bag of rice has jumped 54 per cent in two months, selling at N43,000 and currently above the N30,000 minimum wage.

Even as the Federal Government has put plans to increase workers’ salaries from the current N30,000 minimum wage to conform with the current reality, citizens have called for urgent implementation as financial challenges become overwhelming.

Already, the N30,000 minimum wage, which is not accompanied by other support measures, has become insufficient to keep many households running. In fact, most workers have lost nearly a year’s salary due to rising inflation.

The Guardian gathered that the recent data on food inflation from the National Bureau of Statistics (NBS) and Selected Food Prices Watch Report for the September 2022 increment does not conform with the reality on the ground as regards the current prices of food commodities in the market.

With the rising inflation, checks by The Guardian on current prices of food commodities in the market have skyrocketed, eroding most of the workers’ income.

The NBS had reported that 1kg of rice rose to N445.12 in September but The Guardian findings showed that currently, 1kg sells for N750.00, indicating a 40.65 per cent increase.
 
Also, the report showed that the average price of palm oil (1 bottle) increased by 30.70 per cent from N709.50 in September 2021 to N927.34 in September 2022 but the current price in the open market sells for N1,100.

The report said the average price of vegetable oil (1 bottle) was N1, 075.89 in September 2022. Right now the price has risen to N1,200.

Price of 1kg of beans (brown, sold loose) from NBS data increased by 2.05 per cent from N545.61 in August 2022 but its current price is sold at N800.

1kg of tomato on a month-to-month basis increased to N445.12 in September 2022 from N430.93 recorded in August 2022, indicating a 3.29 per cent increase. However, the current market price indicates it’s selling for N550.

Similarly, the NBS said the average price of 1kg of beef (boneless) increased by 24.39 per cent on a year-on-year basis from N1,768.14 recorded in September 2021 to N2,199.37 in September 2022 but currently sells for N2,500.
 
The Guardian gathered that the cost of living crisis in Nigeria is causing greater focus on the financial wellbeing of employees, as workers earning within the N30,000 minimum wage range have resorted to doing menial jobs after work to augment their allowances and meet up with basic needs.

Most of them after the close of work engage in riding tricycle, POS services while some at the weekend engage in catering and laundry services, among others to augment their income to take care of their families.

For instance, Cynthia Nduka, who works in a private school, says she earns N33,500, adding that the salary was no longer sustaining her due to the rise in the price of foodstuffs and other essential commodities.

She said with the paltry sum she earns, some of her siblings are still dependent on her, which had made her engage in menial jobs to sustain her home front.

According to her, “On weekends I join a catering services company to augment the little I earn. The little support from the food company still goes a long way to meet my needs and feed for the weekend. I pray things to take shape quickly because I’m no longer finding it funny again. Government should please address some policies that will reduce prices of staple foods and household commodities.”

Similarly, a Grade 6-Level civil servant, Solomon Thompson, a father of three children and wife, said the rise in the cost of living has made him engage in the tricycle business after work to meet up with family needs.

He said after the close of work, he takes the tricycle, which he said he bought from the savings he made to add up to support his household.

“With the financial support of my wife, I had to quickly buy a tricycle before I finish the little in my account on feeding and household expenses. So after work, I engage in the transportation business, say from 5:30 pm up to 9 pm. Though it has been stressful, I have no choice but can provide for my family and pay my children’s school fees. Government should hasten the increase of our salaries as they have promised to add up to our financial needs,” he said.

While most employers are clear that responsibility for finances lies with individual employees and not the employer, The Guardian gathered that a healthy or poor financial well-being across a workforce can affect an organisation’s success and sustainability.

The International Labour Organisation (ILO) in conjunction with the World Health Organisation (WHO) estimated that 12 billion workdays are lost yearly due to depression and anxiety costing the global economy nearly $1 trillion.
 
Just as the world began to return to something resembling normality, the new global crises, which emerged, have given employees little respite from stress and effect on their well-being. 

 
The Guardian gathered that the younger employees are the hardest hit, as the cost of living crisis has not impacted everyone equally.

Data from Aviva revealed that employees between the ages of 25 and 34 are more likely to experience financial stress than their older counterparts, making them likely to seek and engage with financial well-being support.

It said that younger employees are a demographic in which employers could generate a significant impact with their financial wellbeing support.

The Director-General of the ILO, Gilbert Houngbo, at the just-concluded International Monetary (IMF) meetings in Washington DC, described a cost of living crisis fuelled by higher prices and a decoupling of wage growth from productivity growth, leading to falling real wages.

He said without immediate action and increased resources; this could increase inequality and place greater strain on businesses.
 
According to him, with many countries having limited fiscal space to provide support to low-income households, the situation could fuel social unrest.

Houngbo highlighted the need for increased support for vulnerable economies that may face high and increasing debt. 
 
He added that greater respect for labour rights and the promotion of sustainable enterprises and better working conditions in supply chains could catalyse economic development, poverty reduction and greater income equality between countries. 
 


Director, of The African Politeia Institute, an Abuja-based think-tank, Dr. Lanre Babalola, who argued that there has not been any concerted effort by the government to address the crisis in living standards, said Nigeria is experiencing a prolonged economic malaise.

According to him, real wages are on a downward trajectory, productivity has remained stubbornly low, the economy is moribund, policies are wrongheaded and together these factors have sent prices skyrocketing.

He said productivity in every economic endeavour and cost of production rank unfavourably against comparable countries both globally and on the continent.

For a nation with a significant proportion of low-income earners, high unemployment and severe underemployment (especially among the youth), a dizzying proportion of the population in poverty, serious gender and income inequalities yawning urban-rural gaps and the spectre of food insecurity, he said the government would need to put effort immediately into increasing disposable incomes of the poor and vast majority of the population.

To tackle the high cost of living, he advised that the government needed to implement structural reforms in two areas.

According to him, the most important of economic and social infrastructure, transportation, energy, ICT and water, account for the former, while education, skills acquisition, and healthcare for the latter.

“Various administrations have attempted to increase aggregate supply, albeit unsuccessfully, without taking full cognisance of the role of aggregate demand. The unintended consequences were, in terms of outcomes, a reduction in real wages, increasing inflationary pressures, and diminishing overall social welfare. To put it bluntly, it is poor in Nigerian society that has been adversely impacted the most,” he said.

As the cost of living crisis soars, The Guardian followed up on employers and organisations, on what they are doing to help employees mitigate and cushion hardship for a positive impact on productivity.

For instance, a firm, Kasapreko Company Limited, announced to double the November salary of all its workforce in the wake of economic challenges.

A memo signed by the Managing Director, dated November 1 and sighted by The Guardian, said the move was in view of the recent volatilities in the country, affecting the wellbeing of staff, stating that management was gravely concerned.

Already, experts are of the view that financial well-being is an incredibly important part of employee well-being and is even more essential in an inflationary economic environment.

They argued that it was time to put together a financial well-being strategy that tackles the tough economic times for employees and delivers for the company or organisation.

According to them, a valued employee is a happy and productive employee.

For them, organisations might not be able to offer double-digit pay rises as inflation surges, but there were other ways to boost their reputation as a business that supports employees.

With this situation, on the plus side, companies are discovering many innovative ways to enhance their value proposition to employees, such as an increased focus on mental health and work-life balance.

The Guardian gathered that most employers are putting measures in place about what they need to do to help employees navigate ongoing cost of living increases and become an employer of choice in the post-COVID-19 pandemic world of work.

HR expert and chief executive of Champion Health, Harry Bliss, gave tips on what employers could do to mitigate the extra burden on employees caused by the cost of living crisis, how financial stress is affecting employees and how to go about it to guarantee productivity.

He linked the burden of financial stress to other areas of well-being from sleep to stress, and mental well-being to productivity.

He urged leaders to develop and utilise a holistic approach to workplace well-being strategies. 
 
He said rather than addressing financial well-being in a silo, the strategies must encompass all areas of well-being. “Through providing support for many areas of wellbeing, employers can address the unique challenges experienced by each employee throughout the cost of living crisis and beyond.

 
“To discover those areas where your support offerings will have the most impact, you need to understand the pressures facing different employees on a granular level. With that in mind, you should collate information on your people’s financial well-being. Once you know where your organisation’s pain points are, you can develop specific initiatives to address them,” he said.
 
Speaking on measures organisations should explore to ease financial burdens on employees, Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale Oyerinde, said with the high cost of living, employers have been very creative and are becoming ingenious to employees’ welfare, especially with the spring up of a lot of welfare schemes.
 
To help cushion the hardship for their workers, he said: “For instance, the Lagos-Ibadan expressway is now becoming a major challenge, so, for our employees coming from that axis, we asked them to work from home. We have also varied our working hours to reduce pressure on employees. I know many of our employers in the manufacturing industry give their products monthly to reduce pressure on employees, while some give paternity leave to mitigate these challenges.

“Employers have been very creative. Though it might be challenging for most of us, we have to be creative to mitigate these challenges. It might not necessarily be in cash. Even if Artificial Intelligence (AI) is gaining ground, it is still humans that will programme and interface with them. It has been a difficult environment but employers too are living up to their responsibilities to ensure the critical elements in the business, which are the employees, survive.”

The Managing Director and Chief Executive Officer, of Cowry Asset Management Limited, Johnson Chukwu, hinted at strategies workers could use to navigate the difficult economic periods.

According to him, Nigeria must improve food security through the improvement of agricultural productivity.

He said there is a need for improved transport systems, energy supply communications and infrastructure.

He called for access to quality healthcare, access to quality of education, clean water and sanitation.

The economist said there was a need for broad-based economic growth with job creation opportunities and targeted support to the most vulnerable in society, through subsidised houses, skills acquisition, free basic education and conditional cash transfer, among others.

For citizens to navigate the difficult economic periods, Chukwu advised families to have multiple streams of income and there must also be secondary means of income.

He also advised families to have an investment income that would grow with interest, dividends and capital gains.

An economic expert, Pan-Atlantic University, Prof. Olalekan Aworinde, said Nigeria’s inflation was increasing at an aggressive rate, a reality which spelt tougher times for working-class Nigerians, many of whom lived on a fixed income.

He said Nigeria’s worsening inflation crisis would lead to a high cost of living, low standard of living, weakened production and more job losses.

He said, “People are not able to meet up with the standard of living in the economy, which will leave them in abject poverty and that is what we are experiencing in Nigeria. You will discover that people are not able to meet up with the necessities of life.

“Those employing individuals will not be able to produce up to the maximum capacity and the implication is that they will sack some workers, which means there will be a loss of jobs. With the economy now, there will be an increase in the government expenditure and tendency of accumulating debts.”