Nigeria’s headline inflation has surged to 31.7 per cent. At 37.9 per cent, food inflation is a scant two percentage points below the danger zone of 40 per cent.
Even the rich are worried. My cousin in Ikoyi, Lagos state, a rich man, called me and complained bitterly about the hardship. He argued that “Nigeria is now the headquarters of inflation”. Ironically, many Nigerians hold that cynical view too.
I told my cousin that Nigeria is a paradise when compared to Argentina which ironically is the global headquarters of inflation. With the inflation rate crossing 276 per cent in February, Argentina musters the world’s highest inflation.
Strangely, Argentina, the winner of the 2022 FIFA World Cup trophy, has a more diversified economy than Nigeria. Its 2023 export earnings for its population of 45, 773, 884 amounted to $66.93 billion. Nigeria, on the other hand, garnered $46.93 billion in export earnings for a population of 223 million people.
However, even with all its perceived economic strength, prices are so capricious in Argentina that sometimes as a consumer is counting the wads of notes to pay for the goods, the price changes before one finishes the payment process and the buyer has to pay more for the same item.
Argentina’s dairy farms are highly developed. The cows receive the best nutrition and health care. Consequently, where a Nigerian cow chips in a paltry two litres of milk per day due to malnutrition and poor health care, a cow in Argentina produces 28 litres of milk in a day. The country adds value to its dairy products and exports large quantities of beef and milk.
Nigeria does not enjoy all that. However, even in West Africa, Nigeria remains a paradise when compared to the pocket size economies to its west.
Nigeria has never defaulted in its Euro bond debt commitments. Ghana defaulted last year and set tongues wagging in the global financial market.
Last year, Guarantee Trust Bank, a leading Nigerian bank lost N35 billion in its investment in Ghana’s global debt instrument because of the default by the tottering West African state.
Even after the ceremonial removal of petrol subsidy on May 29, 2023, Nigeria still musters the lowest pump price of petrol in the West African sub-region. A litre of petrol in Ghana sells for 13.49 cedi. At the current exchange rate of N124.71 to the cedi that amounts to N1, 682.33 per litre. The highest pump price of petrol in the remotest part of Nigeria is N700 per litre
Last week, an American research firm released data on the global state of unhappiness and listed 10 countries that its citizens are known to be generally unhappy. Nigeria was conspicuously missing in the list which was topped by the central Asian state of Uzbekistan.
Uzbeks are the unhappiest people in the world because their country is plagued by an alarming unemployment rate, social unrest and political instability. Nigerians endure similar plagues but remain defiantly happy and mentally stable.
Ironically, the United Kingdom of Great Britain was second on the list of 10 unhappy countries. Britons are very upset by the rising cost of living which saw inflation hitting a record 11 per cent last year. Nigerians remain happier even with food inflation sailing perilously close to 40 per cent.
Britons are equally upset by the political instability that saw four prime ministers running the country in five years. Nigerians endure more troubling instability.
The study suggests that the African extended family system may be responsible for the relative mental stability and happiness in most African countries which ironically have no social security system.
Even with headline inflation at 31.7 per cent, Nigerians are happier than Britons because when everything goes wrong, the extended family system comes to the rescue of the person in distress.
Britons are unhappy because they do not have family members to fall back on. The government is there for everyone, but the government can be impersonal in times of emotional and mental distress.
Nigeria’s surging inflation rate is not a strange phenomenon to those who are old enough to remember history. In January 1996, inflation surged to 47.6 per cent.
The difference between the cost of living at that time and the current situation is that the naira was trading at N21.6 to the dollar at the official window while the parallel market rate was N84 to the dollar.
Things are more difficult today because Nigeria has become more import dependent as it lacks self sufficiency in refined petroleum products in the face of a weak naira plagued by a catastrophic forex supply deficit.
By global standard, Nigeria’s inflation rate is modest. There is something the monetary economists call high velocity medium of transaction. That refers to the lower currency denomination used repeatedly for common transactions, like a bus ride from one bus stop to the next.
Any country that inflation compels it to handle high velocity transactions with its highest currency denomination is in deep trouble.
Nigeria’s crisis has not reached that calamitous proportion. The N100 remains the country’s high velocity medium of transaction. With N200, N500 and N1, 000 notes still far away from high velocity transactions no one is soliciting for the printing of N5, 000 notes.
Besides, those who see Nigeria’s hardship as a worse case scenario should notice that Nigeria is not in the World Bank’s food inflation top-10 list.
Argentina topped the list which have Zimbabwea, Egypt and Haiti among others. Even Vietnam, Asia’s major rice exporter, is in the list.
The naira’s precipitous journey down the precipice could be halted by self-sufficiency in refined petroleum products while at the same time stopping oil thieves in their tracks.
That would address the forex supply deficit and drastically reduce demand at the same time. The fight against food inflation should take a frontal assault through mechanised farming.
Besides catastrophic infrastructure deficit, Nigeria’s surging inflation is largely driven by the superlative greed of manufacturers, wholesalers and retailers.
Dangote, Lafarge and BUA, Nigeria’s three leading cement manufacturers raked in N2 trillion as turnover in 2023. Their profit after tax (PAT) stood menacingly at N760 billion. That is primitive profiteering which fuels inflation.
