Stopping by to purchase two loaves of bread for the little girl in the passenger seat beside me, the other day, I tendered a crisp N1,000 note and waited. When the vendor did not return with my change, I murmured a bit loudly, but the bemused girl quickly jumped in: “Sir, the price is N1,000 for two loaves”; “there is no change.” ‘Oh yeah? I asked, ashen-faced, bewildered. After regaining my composure but still a bit flummoxed, a public lecture delivered a while back by the late Milton Friedman, the American guru of monetary economics, flashed through my mind. He had proclaimed inflation a “disease.” How prescient, how fitting to the reality on the ground in Nigeria, I thought. Given the widespread rises in virtually every consumer item in this country, in which the poor and vulnerable (i.e. 90 per cent of the population effectively), gets squeezed to the bare bones, many have become malnourished and visibly emaciated from hunger and starvation in the streets, and in various neighbourhoods, around us. Who can deny that inflation has indeed become the number one killer disease in Nigeria? Far from it being hyperbolic, or sensational, the choice of title for this write-up is indeed measured and befitting. As a motorist, one sees the sporadic increase in fuel prices, the attendant queues at the gas pumps, the wrench of agony on people’s faces, pushing and shoving each other to fill up their little jerry cans for their little kiosks at their little corner shops.
The above is compounded by the sense that Nigeria is a major oil producer, in an era of rising crude prices. How has the Nigerian ruling elite conspired to keep the country in penury even as the price of crude is on the up? The higher the dollar accruing from selling Nigeria’s crude (one of the finest in the world), the better for its economy, and the suffering masses, you might think? No. Nigeria reaps no higher benefit from rising crude prices than hitherto. This issue was examined in a previous column, Nigeria’s ambivalence towards rising oil prices, PUNCH March 22, 2022. Timipre Sylva, the Minister for Petroleum Resources, had expressed his discomfiture at the rising crude prices and was pleading for lower prices instead! “We do not wish to see the price of crude hitting the $100 mark… we would rather have it at $70 or $80,” he had said. Because Nigeria has no capacity to generate enough crude to meet demand; “It has not been easy to get the wells back to production,” the minister lamented. This is worth restating as it makes it doubly hard for Nigeria to jump off the self-designed inflation treadmill it has been on for decades. And, it is not just some busybody columnist banging on about this. The World Bank, in its latest study, Nigeria Development Update – The Continuing Urgency of Business Unusual, released on Tuesday, June 14, 2022, makes the case even more categorical: “Inflation in Nigeria is one of the highest in the world.”
It is difficult to accuse the World Bank of being alarmist or sensational about these things. The report goes on: “Inflation in Nigeria, already one of the highest in the world before the war in Ukraine is likely to increase further as a result of the rise in global fuel and food prices caused by the war. Hence, Nigeria, for the first time since its return to democracy and alone amongst major oil exporters, is unlikely to benefit fiscally from the windfall opportunity created by higher global oil prices.” Again, this column flagged that up earlier in the year in Between diplomacy and war: Russia-Ukraine high tension (PUNCH February 8, 2022). Russian missiles and bombs had not even started flying into Ukraine at the time it was written. But, the wider ramifications of the impending war on Africa highlighted in the piece were right on the ball: “Significant disruption to international commerce, which an open conflict would trigger, would have a disproportionate impact on the struggling, inflation-ridden, African economies. So, while a million African soldiers may not die in battle this time around, even millions more may die of hunger and starvation on our shores over a sustained period of time.” Was anyone listening?
Economists love to compartmentalise inflation into categories—‘Core inflation’, ‘headline inflation’, ‘hidden inflation’, ‘real inflation’, ‘galloping inflation’, ‘stagflation’ (my favourite) and a few others. These have no meaning to the ordinary man in the street, whose focus is on the most basic, simplest thing: food on the table for the family. When they say Nigeria’s inflation is edging close to the 20 per cent mark, it means nothing to the okada rider for whom bread means so much for the workday. A loaf of bread he bought for N250 a couple of months ago, now sells for N500 today. That is a 100 per cent, not a 20 per cent increase for him. Consequently, the World Bank’s warning on Nigeria’s inflation climbing up to 17 per cent by the end of 2022 has no resonance in the man’s life. He sees only 100 per cent. Inflation used to be a global event, especially, in the post-World War II period as a result of the fixed exchange rate agreed under the “Bretton-Woods” system, which saw much of the world currencies pegged to the US dollar. That cosy arrangement ended abruptly in 1971. Since then, inflation has become national events (because of floating rates of exchange), albeit, with international consequences. In other words, It has become a contagious disease.
Nigeria does not have a floating exchange rate, however. The naira value is pegged to that of the US dollar but, also, leaves the economy vulnerable to external shocks. Inflation is seen as an enemy to be defeated in Western economies, and the key tool for that is monetary targets set by governments for their central banks to fulfil. In hard times, Western economies tend to have very low-interest rates, of no more than 3 per cent at the highest, to encourage investment and shore up growth. To curb inflation, the rate is adjusted on a small, incremental basis of, say, 1.5 to 1.75 per cent as currently in the USA. Nigeria’s interest rate is already hovering above 30 per cent for small-scale and medium-sized industries. With little or no room for manoeuvre by the Central Bank of Nigeria, the World Bank is pushing for the elimination of petrol subsidy, more concession to private investors, end deficit financing, etc. In other words, exert even more squeeze on the poor.
It is often said that only a handful of people pay income tax in Nigeria. This is indeed laughable. According to Nigeria’s Joint Tax Board, only 10 million people are said to have registered for personal income tax purposes in all the states of the federation including the Federal Capital Territory. That is not, strictly speaking, true. Nigeria’s permanent, chronic inflation is a direct tax on the remaining 190 million poor and vulnerable people, which they willy-nilly pay with no registration required. Despite the strong economic numbers in the US, inflation (at a 40-year high) has become a hot-button political issue for the Biden administration and Democrats who are set to lose control of Congress in the forthcoming mid-term elections in November. Why is inflation not similarly a hot-button campaign issue in an election year in Nigeria? Only the brouhaha about “North-South,” “Muslim-Muslim” ticket. The reason is because inflation is seen as a political problem for elected representatives in the US, and in other Western democracies, while it is seen here, as an economic issue for the Governor of the Central Bank of Nigeria only. It is not. But, that is what political leaders want you to believe; it shields them from electoral accountability.