In view of the liberation from the COVID-19 pandemic, which wreaked gargantuan havoc on the global economy between 2020 and 2021, Nigerians looked forward to a better 2022, however marginally. The prevalent view was that with lockdown and recession out of the way, the New Year would offer something better. Besides, after enduring the economic turbulence of 2021, most Nigerians had hoped for a better year this time round, hoping that the 2022 Budget as well as economic policies would give them a much-needed respite from economic pressures.
But despite the enthusiasm, economic experts and analysts were quick to alert Nigerians that there was nothing to celebrate yet. As a result of the fallouts from coronavirus and some global economic realities, analysts predicted that the country’s inflation would still remain high in the New Year. In November 2021, Nigeria’s inflation rate declined marginally to 15. 40 percent from 15.99 percent in October — the 8th consecutive monthly decline and the lowest inflation rate recorded in 2021.
Again, with all the country’s socio-economic problems still very much virulent, coupled with the unexpected hardship Nigerians faced early in the year over unavailability of premium motor spirit or petrol, those who could read between the lines concluded the outlook could be bleak.
One of the first set of experts, who expressed his thoughts about 2022, was the Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane. Early in January, the economist predicted that the country’s inflation rate would remain structurally high at a full-year average of 13.3 percent in 2022.
Rewane, who spoke at the Nigeria-British Chamber of Commerce (NBCC) January breakfast meeting predicted that economic activity in 2022 would be similar to 2021, owing to global inflationary trends linked to COVID-19, such as the lingering global supply shortage.
“We can expect to see sustained cost-push factors, including a planned fuel subsidy removal, new electricity tariffs and additional taxes; alongside legacy issues, such as increased debt service burden and exchange rate conversion. Inflation will remain structurally high at an average of 13.3%, with an increase in Q1 and Q2,” Rewane said.
Rewane said Nigeria’s gross external reserves would decline towards $39 billion as the Central Bank of Nigeria (CBN) increased foreign exchange supply and allowed naira convergence.
He added that the government would increase borrowing to meet deficit financing needs and may result in a sovereign debt default.
As predicted by analysts and economic forecasts, the consumer price index report, released by the National Bureau of Statistics (NBS) at the end of February indicated that Nigeria’s inflation rate changed direction as it rose 15.7% from 15.6% recorded in the previous month. This represents 0.1 percentage point increase compared to the rate recorded in January 2022.
The uptick in the inflation rate was attributed to the increase in the price of goods and services, following the fuel scarcity across the country in February. One major highlight of the NBS report was that core inflation also rose to its highest level in over 4 years at 14.01%, while food inflation dropped to 17.11% in the review period from 17.13% recorded in January 2022.
The current harsh economic reality, which has necessitated price increase across board in the market, has simply confirmed the earlier prediction that the new electricity tariff arrangement as pronounced by the Federal Government and the systematic increase of oil price would make Nigerians pay more for goods and services.
Today, price increase has remained unabated in all sectors. From food items to fast moving consumer goods, the increment has remained steadily high. For instance, consumer goods such as beer, cement, flour, noodles, and virtually every other item have raised their prices to reflect the realities of the times. In another development, there are some service providers in the banking, telecommunication and insurance sectors that have reduced their hours of service or days at work to mitigate the impact of the increase in price of diesel on their businesses. So have radio stations, which have slashed broadcast hours.
It was, therefore, no surprise when the leading pay TV Company, MultiChoice Nigeria, announced that it would adjust the prices at which it offered its products and services upwards with effect from April 1, 2022. The price adjustments, attributed to inclement domestic economic climate, didn’t go down well with its subscribers. While players in other sectors didn’t find it tough responding to the economic reality through price increase, MultiChoice was confronted by many forces, which perhaps believe that it is insulated against inflation and weakness of the naira.
At the peak of the controversy that tailed the increment from the company, the National Assembly waded in.
Meanwhile, this also attracted criticism from various quarters as many Nigerians wonder why the Pay TV Company should be singled out for scrutiny over price. It was also argued that the government’s decision to influence the price offering of the company was an abuse of power.
The issue has thus become a subject of discourse in many fora and led to other issues like Pay As You Go and Pay Per View services controversy.
But where did things go wrong in the market? This is one question an average Nigerian has continued to ask. According to independent survey, the challenge is multifaceted. While some linked the current economic crisis to imbalance in oil price, many are of the opinion that the government’s decision on the electricity sector, which allows market operators to determine the course of action, simply means that Nigerians are to pay the full commercial price for power as determined by the generating and distribution companies.
Federal Government had recently pegged most of its subsidy payments in the electricity sector at N30 billion monthly.
Vice President Yemi Osinbajo, at the opening of the 14th Nigerian Association for Energy Economics (IAEE) conference in Abuja, recently, said the government expected the electricity sector to generate its revenue from the power sector market.
Speaking through the Special Adviser to the President on Infrastructure, Ahmed Zakari, the Presidency stated that, “the Federal Government intends to reduce its interventions in the Power Sector and thus allow the electricity market to run on its own, thereby allowing the market participants to determine the course of action.”
Stakeholders have argued that allowing market operators to determine the course of action simply means that Nigerians are to pay the full commercial price for power as determined by the generating and distribution companies.
Reacting to this revelation, one of the participants at that public hearing and Executive Director, Centre for Transparency & Accountability in the Energy Sector, Abel Godson, stated that, “with the deteriorating nature of electricity supply in the country, coupled with a deteriorating and ageing infrastructure within the electricity network, government’s pre-occupation should be about stabilizing the market, and not tariff hike.”
He also maintained that “promoting cost-reflective tariff at a time where the country is battling one its worst forex regimes and high inflation rates, which affect the cost of goods and services, will be counterproductive. If this current precarious situation is met with any form of hike in electricity tariff, then we can bid goodbye to any meaningful development in the economy,” he said.
In all this, one undisputed fact is that both government and players in the private sector are unable to avoid price increase, a situation which has further altered the consumption pattern in the market. (THISDAY)