2015: A Gloomy Year For Nigerian Consumers

The outgone 2014 was a tough year for the Nigerian consumer, but 2015 may likely be even tougher. From all indications, the much sought relief may just be a mere mirage as industry experts have predicted a gloomy year for consumers.

The Lagos Chamber of Commerce and Industry (LCCI) in its economic review for 2014 and outlook for 2015 last week expressed anxiety on the possibility of consumers paying more for goods and services in 2015. The Manufacturers Association of Nigeria (MAN) also expressed similar fears as production cost is predicted to rise higher compared to previous years.

LCCI in its forecast noted that the country’s inflation rate may cross the double-digit mark in the first half of 2015 as the combined austerity measures introduced by the government and tighter monetary policy of the Central Bank of Nigeria (CBN) will put additional pressure on consumer prices.

The LCCI added that with the oil price slump and the consequent exchange rate depreciation, it was plausible to predict higher inflation conditions for this year. Already, MAN, worried by the effect of the dwindling oil price on the nation’s earnings, especially at the foreign exchange market, warned its members against exposure to the forex market within the next few months. Specifically, members of the association have begun to transfer the high production costs of locally made goods to consumers.

“There will be pressures on production and operating costs across sectors. High cost of imports will also be a major factor. As a result of the import-dependent character of the economy, the sharp declines in exchange rate will naturally push up the operating costs of enterprises in the economy. Many firms are already feeling the heat across all sectors,” the LCCI said.

The group noted that in the past few weeks, the naira exchange rate had depreciated by about 11 per cent in the interbank market and over 12 per cent in the parallel market, adding that the impact of the depreciation on operating costs would be very profound in 2015. These predictions are clear signs of doom for consumers and we urge both the federal and local governments to immediately put measures in place to avoid the impending disaster.

The natural outcome of the depreciating exchange rate in an import-dependent economy is inflation. Invariably, cost-push inflation will begin to manifest in the next few weeks of 2015. This will be driven by high cost of production and high cost of imported finished goods.

We believe that government can avert this danger by reviewing the Monetary Policy Rate and the Cash Reserve Ratio on private sector deposits which was recently pushed  from 12 per cent to 13 per cent; and from 15 per cent to 20 per cent, respectively. Manufacturers should also be encouraged with incentives to source their raw materials locally so as to cut down cost of production.