BY: HighCelebritySquard
Stagnant wages, the inability of a majority of Nigerians to meet their basic needs due to rising inflation and low purchasing power may imperil the economic agenda of President Bola Tinubu.
With household spending rising on a daily basis, more Nigerians are dropping the quality of standard of living in a bid to cope with the current harsh economic reality, A reliable source learnt.
Since coming into office, the Tinubu government has removed the subsidy on Petroleum Motor Spirit, further worsening the inflation crisis and has also devalued the Naira, making imported goods more expensive.
The government has however left the minimum wage frozen at about N30,000 a month and only choosing to provide a wage award of N35,000 across board to all civil servants for a period of six months.
No agreement has been reached with labour unions on a new minimum wage making it unlikely that an agreed wage increase could come into effect immediately after the first quarter of 2024.
To assess the impact of stagnant wages and a decrease in the purchasing power of Nigerians, A reliable source spoke with the Lagos Chamber of Commerce and Industry, the Manufacturers Association of Nigeria, the Real Estate Developers Association of Nigeria (REDAN), a clearing agent and a former economic adviser to former President Muhammadu Buhari.
And while the government is faced with the twin evils of high inflation and a weakening economy, a number of economists are of the view that Tinubu should seek to stimulate growth, create employment and tolerate some level of inflation.
The major spending affected by decisions of people are food, house rent, subscription, clothing, among others. People resort to cutting down on household spending as inflation is eroding their savings, making the money they had on them worthless.
Already, the latest data from the National Bureau of Statistics (NBS) has indicated that Nigerians spent N61.08 trillion on food and other household items and services in the first six months of 2023, which is a 2.85 per cent increase from the N59.39 trillion that was spent in the corresponding period of 2022 at the current purchasers’ value.
Household consumption continues to account for the largest share of the country’s Gross Domestic Product, the NBS stated in its ‘Nigerian Gross Domestic Product Report (Expenditure and Income Approach): Q1, Q2.
It said: “Household Consumption Expenditure, in Q1 and Q2 of 2023 grew by -24.95 per cent and 3.30 per cent in real terms, year-on-year. The growth rates in Q1 and Q2 of 2023 were lower than the rates recorded in Q1 of 2022 and higher than Q2 of 2022.
“Household Consumption accounted for the largest share of real Gross Domestic Product at market prices, representing 57.18 per cent and 64.05 per cent in Q1 and Q2 of 2023 respectively, compared to 78.02 per cent and 63.65 per cent in the corresponding quarters of 2022.”
Household consumption expenditure consists of expenditure, including imputed expenditure, incurred by resident households on individual consumption goods and services, NBS stressed.
In October 2023, the headline inflation rate, according to NBS, increased to 27.33 per cent relative to the September 2023 headline inflation rate which was 26.72 per cent.
Food inflation rate in October 2023 was 31.52 per cent on a year-on-year basis, which was 7.80 per cent points higher compared to the rate recorded in October 2022 (23.72 per cent).
The rise in food inflation on a year-on-year basis was caused by increases in prices of bread and cereals, oil and fat, potatoes, yam and other tubers; fish, Fruit, meat, vegetables as well as milk, cheese and eggs.
Similarly, the situation is forcing more citizens in the country to live in rural areas, slums, and makeshift camps due to inability to afford the cost of rent payment in most urban centres across the country.
Specifically, inflation has triggered a rise in the price of building materials, making projects to be delayed and, in other cases, stalled. Developers have also reduced their portfolios, as purchasing powers of Nigerians continue to decrease for them to stay afloat.
Similarly, rents have increased by between 75 per cent in densely populated cities like Lagos, Abuja, and Port Harcourt, where the hike has risen to about 50 per cent in certain locations in the last three years. For example, a duplex of four-bedrooms that was let out for N4 million to N4.5m is now going for between N6 million and N7 million yearly.
And with the Yuletide approaching, the situation is further compounded with expectation of a rise in the prices of imported goods as the Central Bank of Nigeria (CBN) adjusted the exchange rate from N783.174/$1 to N951.941/$1
LEADERSHIP Sunday gathered that the adjustment was made at the weekend by the CBN, meaning that the cost of clearing cargoes in the nation’s seaports will go up.
It could be recalled that the CBN had on June 24, 2023 adjusted the exchange rate from N422.30/$1 to N589/$1 and on July 6, 2023 it was adjusted to N770.88/$1, on November 14, 2023, it was adjusted to N783.174/$1, now, adjusted to N951.941/$1
Clearing agents, however, stated that, with N194 increment, cargoes will be abandoned at the nation’s seaports while prices of goods will go up.
A lecturer in the Department of Economics, University of Jos, Dr Joshua Reti while speaking on the impact of stagnant wages on the purchasing power of Nigerians said inflation is a persistent increase of prices of goods which, if not curtailed would have a lasting negative impact on the purchasing power of the consumers, particularly when their wages are not increased.
Also speaking, a Nigerian Economist, Dr Adedoyin Salami, who was the chief economic adviser to former President Muhammadu Buhari, said Nigeria needs to consider how she begins to lay in the short term the foundation for middle term via re-establishing economic stabilisation over the next 12 months.
Salami stressed that education is where the country’s biggest investment must lie.
“The country’s future prosperity is also dependent on her ability to build and sustain an agro economy which education can help achieve. If education is sorted, the speed at which our population is growing would come down and we can be more balanced to pursue the skill and enlightenment the country needs to grow,” he said.
Similarly, the chairman, Real Estate Developers Association of Nigeria (REDAN), South West, Debo Adejana, said all the rents were reviewed last year in city centres, as rent cannot be separated from the economy.
“What we’re experiencing is a reaction to inflation in the system. Every property given out for rent is largely an investment property for the owner and returns are expected. As prices of goods continue to jump, landlords would demand higher rent.”
He said fewer properties were completed in the past three years, which indicates that property stock fell within the period, as production has not caught up with demand due to increased population. Adejana pointed out some tenants have also moved out of city centres to the outskirts or fringes owing to rent increases.
