The signs are already visible: the prices for tomatoes, yam, poultry, and fuel are climbing, and at an alarming rate. The worst however is yet to come. Experts have predicted that in the coming months Nigerians will pay more for virtually everything they consume, as key market indicators continue to paint a grimmer picture for Africa’s largest economy’s consumer market.
A rising consumer price index (CPI) and a climbing inflation rate have been blamed for the price hike. According to a research by SB Morgen, Nigeria’s CPI grew by 10 percent over the past six months while inflation rose to 9.2 percent, from 8.6 percent last year. This has been caused by the instability of prices for both locally produced and imported goods since the beginning of 2015.
The price of more commodities are expected rise as airlines and local intra-city transport services prepare to increase fares. “Living standards are expected to drop further with the upsurge in the price of consumables at a time when the average Nigerian is least empowered socially and financially to overcome the challenge posed by rising food and commodities price,” said Chinedu Ozordi, a director with SB Morgen.
Beyond the market indicators, factors including the weaker foreign exchange rates, prolonged period of fuel scarcity, and insecurity in Nigeria’s Northeast have hampered food producers and retailers from operating effectively.
A persistent rise in the prices of commodities will heap enormous pressure on the Nigerian consumer, particularly those in the labour force. The research revealed that large chunk of the Nigerian working class, particularly within the public sector, earn an average of N25,000 and spend 60 percent of it on feeding annually. The remaining 40 percent is split equally between transportation and miscellaneous expenses, with not enough left to save for days with such unfavourable conditions. “The average Nigerian is presently not well placed financially to cope with the rapidly increasing price of commodities,” the report explained.
SB Morgen’s Chinedu goes further to highlight the current hardship facing public workers, most of whom are owed more than six-months of wages. “As a matter of fact, over 10 of the 36 states of the federation presently owe their workers at least 2 months wages, with others meeting their wage obligations beyond due dates. This in itself poses a serious challenge as the average Nigerian not only faces the challenge of increasing prices, but also a scarcity of funds to meet up the daily spending requirements.”
Omair Ansari, a Renaissance Capital Frontier Consumer Sector analyst, explained in an Op-Ed published on Ventures Africa that Nigeria’s current predicaments are familiar to most frontier markets. “Political, economic, security and climate hurdles tend to be widespread in frontier markets, particularly in Sub-Saharan Africa.” The need to fulfill basic human requirements will always support consumption growth, he admits, but only if consumers are able to make purchases.
Ansari says achieving this will require the incorporation of innovative solutions. “This is where we think financial technology (such as M-Pesa) is critical for frontier markets, including Nigeria.” For SB Morgen, a concerted government effort will prove vital in shielding the Nigerian consumer market from a greater damage. “The federal, state and local governments need to play their part in curtailing the persistent rise in consumer commodities to where they have reasonable control over, for example by encouraging small scale farming across the nation.”