At the start of the month, a Nigerian Twitter user mentioned President Muhammadu Buhari in his tweet, informing him that ₦10 sugarcane has been scrapped [by vendors] and the head part is what you’ll be given [by vendors], if you request for ₦20 sugarcane.
Kamal Mohammed, who posted the tweet is a Kaduna resident, one of the Nigerian states where ₦10, ₦20 and ₦50 currencies still had purchasing value, unlike Lagos, Rivers or the FCT. Within this fiscal year, the cost of living in Lagos has increased by ten to twenty percent due to the Okada Ban in February.
The Forward and Backward Linkages
No doubt, the outbreak of COVID-19 affected the economy (national and global) due to lockdown measures as manufacturers of essential products stopped producing; crucial business operations was at a standstill; farmers had to leave their farm crops without supervision; global crude oil price went below $22 per barrel [the lowest since 2003]. All these affected Nigeria’s economic sustenance, leading to an increase in food prices, transport costs and other services, which contributed to an increase in the cost of living across states while many families were whisked into the country’s poverty statistics.
Though essential service providers [mainly food and drug marketers] were exempted from the lockdown but the push-pull effect of the pandemic on consumption expenditure made basic amenities become scarce and expensive, service providers also slightly adjusted their prices, leading to an increase in cost of living in many Nigerian cities, especially Lagos, Port Harcourt and Abuja.
After the okada and tricycle ban in Lagos, transport fares increased by almost a 100 percent in some cases. There was also a hike in food prices within the same period. National food inflation increased by 1.15 points between January to August, contributing significantly to the overall inflation rate in the country.
The gradual ease of lockdown measures across Nigerian sectors and businesses brought in new economic realities for service providers and consumers – Electricity Distribution Companies (DISCOs) operationalised service-based tariff, leading to hike in household electricity consumption bill and prepaid meter recharge unit price; The NNPC’s petroleum products marketing and distribution arm announced a thirty percent raise in petrol price [from original price] while product marketers raised it by 40.7 percent, increasing pump price to ₦160 per litre and; The country’s most patronised Pay TV operator, MultiChoice Nigeria raised cable TV subscription price by thirteen percent, adding about ₦2,000 [for DStv users] on all its packages.
Fuel and electricity price hike was a result of the Federal government’s decision to stop subsidising these services and also influenced by trickle down economics of operationalizing 7.5 percent VAT and Stamp Duty charges within the same period. How wouldn’t these multiple final tax burdens worsen the standard of living of an average Nigerian?
The Government’s Prerogative
COVID-19 pandemic in Nigeria raised the unemployment rate by four percent to 27.1 percent as a result of massive retrenchment in the private sector but the government’s post-pandemic recovery plan could remedy the imminent economic recession.
Admittedly, stopping subsidy payment to focus on maximizing productivity and re-strategizing in the Power and Oil sector is a good step that will payoff in the long run for economic sustenance. Also, the restriction of FOREX for food and fertilizer importers is a welcome policy that will divert more attention and investment to local production of food items, aided by government incentives within the agriculture sector and supply chain network.
However, the current tax policies do not favour Nigerian businesses and citizens as it constrains standard of living in many Nigerian cities and could make SMEs fold up in no time. Also, the federal and state governments need to align their tax policies, a requisite that will reduce final tax burden on citizens.
But kickstarting the ₦75 billion COVID-19 Survival Fund for MSME is a needed policy for the post COVID-19 economy as SMEs account for ninety-six percent of businesses and eighty-four percent of the labour force in Nigeria.
Nigerians anticipate a re-opening of the land borders soon, as it will help bring many SMEs back to business, improve the standard of living of residents in border towns as well as people in other parts of the country.
This article conveys the views of the author and not necessarily that of the trustees, staff or members of Ominira Initiative.