Following the Covid-19 crisis, the CBN devalued the NAFEX exchange rate twice, at c.12.0%, and adjusted the official rate by c.23.0%. Furthermore, PMS price was revised upwards by c.12.0% 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%. The NBS also reported Feb-2021 inflation data showing that food inflation rose to a 16-year high of 21.8%.
To highlight the severity, data from NBS shows that Nigerians spend 56.7% of their income on food. With a misery index of 50.6%, 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% GDP.
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.