Many African countries are still grappling with the negative consequences of the COVID-19 global pandemic. While decent measures put in place to curtail the economic impacts of the pandemic have made significant positives, the war in Ukraine has eroded the positives. The Kremlin’s offensive against Kyiv has dealt a major blow against world economies, the African region not being immune. Nigeria, one of Africa’s giant economies has suffered a huge economic upset characterised by runaway inflation of the Naira to the greenback.
The average exchange rate in the parallel market is now as high as N610 per dollar against the official exchange rate of N416.08 per dollar. Most importers of food, raw materials, and machinery do not have adequate foreign currency from the official channels; as a result, they access the parallel market at a higher rate. This anomaly of undervaluing the United States Dollar against the local currency by the authorities has created unforeseen consequences for business productivity. Consequently, the budget for the much needed social safety nets in times of economic shocks due to global instability has invariably suffered.
Nigeria’s economic woes continue as their currency is reported to have exponentially inflated in the month of May to settle at over 17 per centum. On Wednesday, the national statistics agency National Bureau of Statistics (NBS) said Nigeria’s inflation rate increased to 17.71 per cent on a year-on-year basis in May. According to NBS Consumer Price Index (CPI) and Inflation Report dated May 2022 released in Abuja, this is a 0.89 per cent increase from the previous month. Comparing inflation statistics obtained from the same source for the month of April, Nigeria’s inflation has worrisomely increased. In the month of April, the country’s economic data pegged inflation at 16.82 percent against a significant increase to 17.7 percent for the month of May.
The recent statistics reflects the Naira’s northward trend in inflation continues to run amok in the Western country, prompting prices of basic commodities to plummet beyond the reach of many. Foodstuff inflation sprung up to 19.5 percent in May, from 18.4 percent in April, driven by the cost of bread and cereals the National Bureau of Statistics noted. The price of every commodity in the market has tripled. The official rates are also being queried by economic analysts since a cursory look at prices in the Nigerian markets reveals that the inflation rate is beyond the NBS estimate. This is suggestive that the official statistics agency might have doctored the figures to portray a seemingly containable inflationary figure.
The increasing prices pose a serious threat to the average Nigerian, with the World Food Program (WFP) raising concerns that the organisation is now operating at limited funds to cater for most ailing economies in Sub-Saharan Africa. However, the Nigerian government remains adamant that it is not to blame for the soaring basic commodity prices. As has been the case for most African countries with suffocating inflationary figures such as Zimbabwe, the government as pointed to the Russia-Ukraine hostility as the major mischief. The Russian government however denied liability for putting African people’s lives at stake during President Putin’s meeting with the A.U Chairperson.
The Bloomberg however notes that choked supply chains, partly due to Russia’s invasion of Ukraine, and an almost 100% increase in gasoline prices this year, are placing upward price pressures on Africa’s largest economy. They are also hindering its recovery, as are security challenges in its northern regions and persistent oil production troubles. It appears therefore that the price hikes are not only concentrated on the war in Ukraine, but some questionable monetary and fiscal policies that tend to stall productivity and undercut the workers’ salaries in view of constraining economic shakeups.
The worst fear on the recent statistics is that Nigerians are passing through lifestyle difficulties as they can no longer eat twice a day due to the high prices of commodities in the market. Many Nigerians have reduced their consumption due to the prevailing high prices in the market. Macroeconomic studies have shown that consumption expenditure is one of the key drivers of economic growth. A downside in private consumption in Nigeria is feared to affect the GDP growth for 2022.This will inadvertently undermine the country’s economic strength on Africa’s strongest economies index.