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Inflationary Market In Nigeria: The Rise Of ‘Greedflation’ - INDEPENDENT
ISAAC ASABOR
As Nigeria grapples with economic challenges, it has at the same time been witnessing a surge in inflation rates.
As businesses struggle to cope, not a few of them have resorted to the perpetuation of “Greedflation.” It is against the foregoing backdrop that Daily Independent delves into the causes, consequences, and potential solutions to this alarming trend.
In June 2024, Nigeria’s headline inflation rate hit 34.19%, the highest since March 1996.
Food inflation, a significant component of the basket, soared to a record high of 40.87%. Bread, cereal, potatoes, and fish prices surged, burdening households across the nation. Additionally, housing and utilities costs rose, further exacerbating the situation.
Ostensibly exploiting the inflationary situation as an excuse, there are indications that not a few sellers and service providers have resorted to “Greedflation” which refers to businesses exploiting the inflationary environment for their gain.
As prices soar, some companies and traders engage in opportunistic practices, passing on excessive costs to consumers.
This behaviour not only erodes purchasing power but also undermines trust in the market.
In fact, one of the factors driving greedflation include fuel subsidy removal. The removal of fuel subsidies has contributed to higher inflation.
This is as fuel prices surged, transportation costs increased, affecting the entire supply chain.
In a similar vein, the weakening of Nigeria’s local currency, the naira, has equally depreciated against major currencies, thus resulting to the amplification of import costs, leading businesses to face higher expenses, and in turn transferring the burden to consumers.
Also noted to have exacerbated the inflationary situation is the global supply chain disruptions due to the pandemic that occurred few years ago, and whichdisrupted the availability of goods, leading to scarcity and price hikes.
According to not a few experts, the negative impact of the pandemic on global supply chain still lingers.
Given the foregoing inflationary situation across markets, consumers have been bearing the brunt of greedflation, resulting to basic necessities becoming unaffordableby each passing day, and impacting their quality of life, and as a result, Small and Medium-sized Enterprises (SMEs) are struggling to maintain operations, even as rising costs are squeezing profit margins, hindering growth and investment.
Therefore, the Central Bank of Nigeria (CBN), through its monetary policies, have been urged to strike a balance, as they noted that while curbing inflation is crucial, the apex bank should avoid stifling economic activity.
Ostensibly to have taken note of the somewhat counsel, it will be recalled that the Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, in November 2023 outlined the policy direction of the Bank for 2024, with a pledge to prioritise price and exchange rate stability to promote sustainable economic growth, and safeguard the livelihoods of Nigerians.
Mr. Cardoso made the disclosure in his keynote address at the 58th Annual Bankers’ Dinner and Grand Finale of the 60th anniversary of the Chartered Institute of Bankers of Nigeria (CIBN), held at Eko Hotels & Suites, Victoria Island, Lagos, on Friday, November 24, 2023.
While assessing the performance of the CBN in the past two months, unarguably making reference to September and October 2023, he informed the audience that the leadership of the Bank had critically reviewed the effectiveness of the Central Bank’s monetary policy tools and had spent time fixing the transmission mechanism to ensure the decisions of Monetary Policy Committee (MPC) meetings actually resulted in desired objectives.
According to him, there had been a dislocation of monetary transmission mechanism, for quite some time, which rendered the MPC meetings largely ineffective.
Therefore, to address this challenge, he said the Central Bank of Nigeria was committed to achieving monetary and price stability.
“This is not just a technical objective, but it has real-life implications for the well-being of our citizens. Through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities, we can ensure a more stable exchange rate, control inflation, and create an enabling environment for businesses and individuals to thrive,” he added.
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Also, through Sector-Specific Interventions, the federal government has in a similar vein been urged to target policies that can address supply chain bottlenecks in order to ensure that essential goods remain accessible.
Also, the needs for transparency and accountability have been stressed as businesses must be accountable for their pricing decisions, even as regulatory oversight can discourage opportunistic practices.
According to Mr. Martins Eboigbe, an Economist, “Nigeria faces an uphill battle against greedflation.
As businesses navigate these challenging times, policymakers, businesses, and citizens must collaborate to stabilize the economy.
Only through concerted efforts can we mitigate the impact of rising prices and restore confidence in Nigeria’s market”.
Certainly! Greedflation, being a term that aptly captures the intersection of corporate greed and inflation, has been witnessed across markets in Nigeria in the past, and still been witnessed.
For instance, in May 2023, in a raw and rapacious move, petrol marketers raised the pump price of petrol from less than 200 naira per liter to over 500 naira per liter.
This occurred shortly after President Bola Ahmed Tinubu announced the removal of petrol subsidies.
In the building sector, exploitation exists as experts note that greedflation is most observable in industries with dominant players or where competition is lacking.
The building sector in Nigeria, for instance, has witnessed instances of inflated prices driven by corporate greed.
Regarding corporate profits and inflation, a report analyzing Commerce Department data found that corporate profits contributed to 53% of inflation during the second and third quarters of 2023. Greed-driven price hikes have been a significant factor in Nigeria’s inflation surge.
These examples highlight how greed and exploitation play a role in driving inflation beyond traditional economic factors. However, Mr. Desmond Iweka, a civil servant, said, “As Nigeria grapples with rising prices, understanding and addressing greedflation becomes crucial for policymakers and consumers alike”.
Without any iota of exaggeration, it is obvious that consumers across the country are beginning to witness an unfriendly market, so to say, more than ever before making them to groan as the burden is literarily eating into their pockets and disposable incomes.
Take for instance, a particular drug that is been sold by three different pharmacies within a community, with two of them located on the same street, variously selling the drug at N6,500, N15,00 and N25,000. According to Mr. Ephraim Gbogboade, “It seems sellers in Nigeria now sell at prices that suit their moods”.
Without a doubt, the prevalence of the act of greedflation across markets in Nigeria is eliciting concerns. For instance, the leader of market heads in Ile-Ife, Osun State, AkinwandeOlajire, has said Ooni of Ife, Oba AdeyeyeOgunwusi, banned market groups in the town over their roles in current high cost of food items in the community.
A video of Olajire addressing traders in a neighborhood market in Ile-Ife had gone viral. Olajire, who spoke in Yoruba language said Oba Ogunwusi had suspended market groups, as their activities have been fingered as the cause of high cost of food items.
He said groups of traders dealing in various food items have been involving in fixing cost of goods, even when they have bought the items cheaply from farms.
In a similar vein, the National Association of Nigerian Students (NANS) had in March 2024 called on the government to establish a Price Control Board to regulate food prices.
The current media personnel to the NANS Senate President, Adejuwon Emmanuel, who made the disclosure said, “Despite a decrease in the exchange rate, the prices of goods produced domestically continued to soar”, and therefore, urged the government to alleviate the burden by creating price control.
Also in a similar vein, the Federal Competition and Consumer Protection Commission (FCCPC), in pursuant to Sections 17 (a), (e), (g), (l), (s); 72(2)(a); 108(1) (b); 124; & 127(1)(a)(b) of the Federal Competition and Consumer Protection Act (FCCPA) 2018 has on Wednesday, April 17, 2024 issued a statement which says it is aware of the concerns expressed by Nigerians regarding the continued rise in prices of goods and services.
It added in the statement that “Despite the recent appreciation of the Naira against the dollar, consumers continue to face escalating costs without a corresponding decrease in prices. The commission explains that this situation is unacceptable, and that it is committed to protecting consumers from exploitation.
