Just like a thief that surreptitiously sneaks into a house and loots valuables, spiraling inflation steals the wages of workers and impoverishes millions of people, leaving them in a state of despair and despondency.
It is worth noting that in the continuous increase in prices of goods and services and stagnation in wage growth leads to less disposable income for most, and it has never been this bad for Nigeria, Africa’s largest economy.
Nigeria’s inflation rate increased by 15.75 percent (year-on-year) in December 2020, the highest rate recorded in 3 years, according to data from the National Bureau of Statistics (NBS).
According to the Bureau’s Consumer Price Index report the latest figure is 0.86 percent points higher than the rate of 14.89 percent recorded in November 2020.
There are no glimmers of hope or light at the end of the tunnel that the people will drink wine from the golden goblet this year as analysts expect that the monster will remain elevated in 2021.
The pessimism is hinged on structural constraints such as food supply shocks, foreign exchange policies, higher energy costs, foreign exchange illiquidity, coronavirus disruptions, and heightened insecurity in major food-producing states.
Analysts at Cordros Capital Limited have said the inflation rate will reach 18.19 percent at the end of the second quarter of this year, While analysts United Capital expect the headline figure to peak at around 16.0 percent before pulling back, if no further policy adjustment is made.
Chief Executive Officer, Financial Derivatives Company Limited, and economist Bismarck Rewane, has predicted that double-digit inflation in the country will remain and average at 16 per cent in 2021.
The implication of spiraling inflation is that more Nigerians are going to be poorer and pensioners will earn less since the real rates of returns on their nest eggs are fast deteriorating.
Nigeria’s income per capita has been on a downtrend since 2015 as output growth continues to lag population growth, indicating worsening living conditions of the Nigerian populace.
The country’s poverty rate stood at 40.10 percent in 2019 while unemployment rate accelerated further to 27.1 percent in the second (Q2-2020)), from 23.1 percent in the third quarter (Q3) 2018.
The economy slipped into a technical recession in Q3-2020 after two consecutive quarterly decline in national output, and this marks the second recession since the 2014 commodity price shock.
Time is running out for president Buhari and his team to formulate structural policies that will boost investors’ confidence in the economy and moderate inflation.
The reopening of land borders will help ease pressure on food prices, and the president should pay more attention to the unrest across the country as farmers have flee farm lands over fear of being kidnapped and killed by bandits and the Fulani herdsmen.
The government will also need to address various structural challenges faced by farmers in the country if food security is to be achieved, according to analysts at CSL StockBrokers Limited.
“That said, the insecurity in food processing regions, if not swiftly addressed, will remain a major drag to achieving food security. There are reports that many farmers in those regions no longer go to their farms for fear of being killed or kidnapped,” they summed.