Manufacturers, consumers groan as inflation bites harder
By Felicia Nwosu
As inflation continues to erode the value of the naira such that the exchange rate of N700 to a dollar this week, both manufacturers and consumers bemoan their fate. The harsh economic reality has led to untold increases in the prices of goods and services such that manufacturers and consumers alike have to continually look for cheaper and affordable means of survival. In economics, the type of inflation Nigeria is witnessing is called Galloping or jumping inflation. This refers to inflation that develops at a rapid pace, dual or triple-digit annual rates. According to economists, such a form of inflation is dangerous for the economy as it mostly affects the middle and low-income classes of the population and can easily lead to recession.
Recall that at the beginning of this year, the World Bank made a scary revelation or prediction, that Nigeria may have one of the highest inflation rates globally in 2022, stating precisely that it would hit 95.1m in the same year. With skyrocketing prices in goods and services, which it stated, would impede the country’s attempt to achieve economic recovery and erodes the purchasing power of most vulnerable households. It was projected that this could push 8 million Nigerians into poverty, with the possible disruption of consumption, investment, and saving decisions, among other consequences.
“In 2022, Nigeria is expected to have one of the highest inflation rates in the world and the seventh highest in Sub-Saharan Africa,” it said in its Nigeria Development Update. High inflation is frustrating Nigeria’s economic recovery and eroding the purchasing power of the most vulnerable households. In the absence of measures to contain inflation, rising prices will continue to diminish the welfare of Nigerian households,”
The above was corroborated by the National Bureau of Statistics when it stated in its report that on average, four out of 10 individuals in Nigeria have real per capita expenditures below N137, 430 per year, which translates to N376.5 per day.
In the same vein, the Manufacturers Association of Nigeria on Friday, July 8, 2022, warned that a shutdown of manufacturing activities was imminent if nothing was done to address the soaring cost of energy bedeviling the sector. It revealed in its “Manufacturers CEO’s Confidence Index that its members had to resort to adopting survival strategies to improve production.
MAN, therefore, implored stakeholders to collaborate to redeem the few surviving sectors there to avert their sudden demise as a result of challenges arising from the inadequate electricity supply, inaccessible foreign exchange, and rise in the cost of diesel.
A marketing expert, Nsima Ogedi-Alakwe, the Principal Consultant, Gotcha Communications Ltd, also empathised with the Nigerian consumers and manufacturers while expressing concerns over the persistent increase in domestic prices. She noted that the successive increase in prices has profound implications for all stakeholders in the economy including households, businesses, and investors who have to cope with the economic hardship that inflation will bring.
“The challenges that we see in Nigeria are not limited to the country. Of course in the world we are seeing inflation rising and we see the cost of energy going up. When your cost of inputs is going up, there is just so much you can pass to the consumer, already, the manufacturing cost is high. The second thing which I have mentioned already is that the disposable income for the consumer is shrinking. When the consumers do not have enough money in their pockets, when they get to the point of purchase, they will be making choices not based on what they preferred but based on their pockets.”
Corroborating the view above on the harsh impact of the economy on consumer’s disposable income, Mr. Michael Sax, a Music Director in one of the leading universities in Nigeria, noted that because of the overall rise in the prices of goods and services generally, he has learned to cut his cloth according to his material by obeying the law of scale of preference.
“Like the normal young person living in Nigeria with a fixed amount of salary that can now afford less than what it used to afford, a higher percentage of my income is spent on necessities, giving little or no room for savings and investment. And there is no cushion against the loss of purchasing power as a result of the current inflation. As a young man, one has to think twice about one’s choice of purchase, only very important things get into the already strained budget for the month. There is now a conscious effort to manage things like hair cream, perfumes, and skin care products so they can last a very long time.
“The current inflation has practically forced me as a person to be very frugal with money. I use public transport, and do Uber occasionally, I walk distances where I would probably take a bike on a regular day (maybe the bike ban in Lagos is a blessing in disguise), I now have to cut my hair less often, Netflix is now the way to go when I want to relax as it requires less money in comparison to a cinema trip. Because of the drop in currency value as a result of inflation, if there is a need to change my mobile phone or gadgets, I now buy the U.K used one. I now have to compare different data plans to see the one that offers more internet data and bonuses at a relatively cheap cost. All these and more are what the average Nigerian is dealing with at this time. I hope and pray that the situation gets better in the nearest future.”
Another consumer, a School Administrator in a renowned church school who prefers to remain anonymous, shared her experience on how she has introduced different strategies to manage her home with the available resources.
“The inflation has affected my purchase in the house; I have reduced the quantities of the things we buy, and go for the cheaper alternatives even if the quality is low. You know that even the manufacturers themselves are reducing the quantities of these items, we have also reduced the amount of food we eat, we drink more water now.”
Martins, a unisex fashion designer noted that although he buys his wares in bulk, the ravaging impact of inflation has negatively disrupted that, thereby affecting his quantity of buying.
“In fact, the inflation rate is not affecting food stuff only; even data prices and transportation fares have also increased. School fees and stationeries for children, everything has gone up, I don’t know where this country is heading.”
There is no gainsaying the fact that both the consumers and manufacturers are on the same ship as far as the high cost of living and production is concerned. The greatest worry of Nigerians however is that there seems to be no concrete measures to stem the tide as the government and the handlers of the economy seems content to play the ostrich.
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