The challenges occasioned by COVID-19 crisis faced by consumers in the country last year are not likely to abate in the short term despite increased economic activities, analysts on the CSL Research Team, have predicted.
In a report obtained by New Telegraph at the weekend, the analysts said their forecast was based on recent economic indicators, which predict that inflation is likely to continue to head northward. Specifically, the analysts said they were expecting further electricity tariffs and premium motor spirit (PMS) price hikes, as well as continued scarcity of foreign exchange and its attendant impact on food prices.
The analysts stated: “The year 2020 provided little respite for Nigerian consumers. At the start of the year, the Federal Government implemented a VAT hike of 50.0 per cent to 7.5 per cent in February.
Shortly after, COVID-19 hit, leading to job losses and wage cuts. “Following the COVID-19 crisis, CBN devalued the NAFEX exchange rate twice, at c.12.0 per cent, and adjusted the official rate by c.23.0 per cent.
Furthermore, PMS price was revised upwards by c.12.0 per cent and electricity tariffs nearly doubled on average
“Recently, the National Bureau of Statistics (NBS) released unemployment data for Q4-2020, which revealed a surge to a record high of 33.3 per cent. NBS also reported Feb-2021 inflation data, showing that food inflation rose to a 16-year high of 21.8 per cent.
“To highlight the severity, data from NBS shows that Nigerians spend 56.7 per cent of their income on food. With a misery index of 50.6 per cent, it implies worsened economic woes.
These pressures continue to mount amidst stagnant and, in many cases, declining nominal and real wage rate. Unsurprisingly, economic growth remains uninspiring, given household consumption makes up c.60.0 per cent GDP.”
They further said: “Looking ahead, we see little respite for Nigerian consumers. While we believe that increased economic activity will marginally improve household income, cost pressures on household consumer baskets will dampen any growth.
“A further electricity tariff hike is likely by Jun-2021 and despite the resistance to the PMS price hike, we believe a hike is inevitable in the mid to long term. Also, food prices continue to soar as FX challenges remain.
Overall, in the short-term, the outlook looks grim for the Nigeria consumer; however, sometimes it is darkest before the dawn.”