Nigeria’s Deepening Cost-of-Living Crisis Is Turning Deadly - BLOOMBERG
MARCH09,2024
(Bloomberg) -- Nigeria, a country long used to hardship, is facing a crushing cost-of-living crisis.
Prices for some vital food staples have doubled in a matter of months. Trucks hauling items like rice and pasta are being hijacked along rural highways. Protests have bubbled up in major cities and soldiers now stand guard to prevent grain warehouses from being ransacked by desperate citizens.
At the heart of the upheaval in Africa’s most populous country are aggressive reforms by President Bola Tinubu, who scrapped a popular but costly fuel subsidy and eased foreign-exchange controls shortly after taking office in May.
The moves were welcomed by the outside world as long overdue, but the short-term results have been painful for Nigerians. Inflation touched a 28-year high in January and the naira has crashed by 70%, pushing tens of millions of poor people into extremities.
“This is the first solid meal that my family will be having in 18 days,” said Rahma Isma’il, a widow with six children in northern Kano state, who bought the food with 500 naira ($0.30) a passer-by gave her son. Her family had been surviving on kunudawa — a corn-based drink that is neither tasty nor nutritious, but quells hunger pangs.
Read More: Nigeria’s Top Rice Dish Doubles in Cost as Inflation Hits Home
Food has always been costly in Nigeria, where an average household spends more than 50% of its budget to eat, but the recent price rises are making matters even worse. The Food and AgricultureOrganization of the United Nations estimates more than 26 million people face food insecurity this year, around 14% of the population.
What Bloomberg Economics Says...
“At a macro level, Nigeria has taken bold reforms - including two naira devaluations and a big rate hike - to converge exchange rates, stabilize the naira and rein in runaway inflation. On the micro level, households and business are taking pain from these measures, particularly from high inflation that is eroding real income.”
-- Yvonne Mhango, Africa Economist
A lack of security, highlighted by the abduction on Thursday by at least 287 school children in northern Nigeria, is also contributing to to food price rises.
The authorities are trying to respond. The central bank raised interest rates by 400 basis points to a record 22.75% on Feb. 27 to stemprice pressures and bolster the currency.
The International Monetary Fund, a strong advocate for ending fuel subsidies and foreign-exchange controls, called on Monday for immediate steps to tackle food insecurity while welcoming the approval of an “effective and well-targeted” social protection system.
Tinubu, who declared a state of emergency in Julyto counter the rising cost of living,plans to start distributing grains in the next couple of weeks. The governmentwill also begin temporarypayments of25,000 naira a month to about 12 million Nigerian households,resuming a program begun by the previous administration that was suspended amid claims of corruption.
Temitope Ajayi, a senior presidential aide, said the government was also taking a range of measures to boost food production.
``Within the next 6-9 months when we will be in harvest season there will be surplus food in Nigeria and commodities will become very cheap and affordable,'' he said. ``The operation against merchants who are hoarding commodities for price gorging is also helping to bring down prices.''
Relief is desperately needed.
Seven people were trampled to death in a Lagos neighborhood on Feb. 23 when a mob stormed an auction to cheaply sell off rice seized from smugglers. The price of rice — a beloved staple on Nigerian dinner tables — has soared 98.5% in the last year.
“I have removed rice from my food now. It’s only garri and groundnuts that we eat,” said Abel Wurot, a private security guard in the capital, Abuja, who earns 35,000 naira a month. “I went to the market to buy food and the prices sent me back. Can you imagine that the price of one mudu (1.13 kg) of rice is over 2,300 naira? Something we used to buy for 1,500 naira last month,” he said.
Desperation has led to the looting of emergency government stockpiles of staples and attacks on trucks transporting food.
Read More: A Nigerian Farmer’s Murder Shows Food Security at Tipping Point
A televised incident on March 1 in Kaduna state in the northwest showed dozens of people swarming over a vehicle, tearing off its tarpaulin with their bare hands and carting away packets of spaghetti that used to cost 90 naira a couple of years ago, but now go for more than 1,000.
The images recall the violence of 2020 during the pandemic, when crowds looted warehouses in protest against politicians they accused of hoarding amid a wider backlash against police brutality.
Trucking companies worry about losing business as customershold back on transporting goods.
“It is more or less like riot and insurance does not cover riot,” said Yusuf Lawal Othman, the president of the powerful association of road transport owners, whose members have been attacked. “It is becoming so rampant, even the owners of the goods that we carry are now afraid to move those goods.”
Worried about the potential for tensions to escalate further, the government is deploying soldiers nationwide to guard food warehouses and efforts to distribute staples door to door.
Government officials have privately shared concerns about an uptick in protests in cities including Port Harcourt and Lagos that could turn violent, threatening to overshadow the one-year anniversary of Tinubu’s narrow election victory last May.
The cost-of-living crisis is not just hitting the poor. Even in the upmarket shops used by affluent Nigerians, it’s becoming difficult to keep up with surging prices.
PZ Cussons Plc, which sells a number of household goods in Nigeria, told investorsthat it has raised prices 12 times in recent months.
Monica James, who works in a store in the middle-class residential area of Lokogoma in Abuja, has given up putting new price labels on the many items in the shop.
“The prices seem to change every day, I have never seen anything like this,” the 54-year old said from behind the counter. “Now, we don’t even bother to change the prices anymore: We let the customer find out at check-out.”
Pricey products areprompting shoppers to foregoitems like imported apples and apricots, adding to a sense of sacrifice that is not helped by the skepticism of ordinary Nigerians that the government is making cutbacks of its own.
This year’s budget was lined with costly SUVs for officials, Tinubu has the largest cabinet since 1999 and his entourage on foreign visits hasn’t been trimmed to sparethe public purse.
Meanwhile, the worst may be yet to come. Analysts see inflation peaking in the mid-30s in the second half of the year, up from 29.9% in January, with another round of price hikes expected when the effects of the naira’s most recent tumble against the dollar last month kick in.
“Simply put, this is the worst since I have been living,”saidFehintola Akintunde, 53, who supplements her income as a research analyst inIbadan, a city north of Lagos,with a side hustle selling food. “I have been aware of cost of things for over 40 years, but it has never been truly this bad.”
--With assistance from Agnieszka de Sousa and Mustapha Adamu.
