Source:
https://www.aljazeera.com/economy/2021/11/8/as-inflation-bites-nigeria-small-businesses-struggle-to-survive
Monday, November 8, 2021
Crisis in Nigeria
Inflation in Nigeria is hitting its record high this year causing small businesses to squeeze. Cost of raw materials, food, fuel, and etc. keep rising with no sign of coming to a flat top. Small businesses have to cut down on their menu items and cost of production to sustain or they have to pass the high costs as prices to customers, who are also struggling. Nigeria’s economy shrank 1.8 percent in 2020, it is the sharpest decline since 1983. According to International Monetary Fund, Nigeria is expected to grow only 2.5% this year. These rising prices are affecting the growth rate as well. Monetary policy and exchange rate management has further damaged the situation. The central bank had devalued the currency, causing high inflation rate. This is a serious problem in Nigeria because most of their products are dependent on the exchange rate because they import them. All of this has worsened small businesses in Nigeria which makes up 96% of the business and 84% of jobs. These businesses are also reluctant to raise prices in attempt to transfer costs to the customers because they are in fear that people will learn to live without these products are find alternatives. Experts predict recovering from this crisis is going to be far from difficult for the economy of Nigeria, and not so soon.
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3 comments:
The pandemic has been detrimental for many countries. Just like in the U.S, Nigeria has been experiencing inflation and an increase in COGS. It makes it very hard to recover from the pandemic when as a country you have to rely on other countries for your goods. Even if Nigeria started to produce goods domestically the price of the goods would have to rise because it is more expensive to produce in the country. I see an increase in the price and unfortunately, I do not see any way that the businesses maintain stable prices and be able to continue to operate.
It will be hard for these businesses to stay afloat while their costs keep rising. But I think there will come a time where they will need to start to passing some of the costs onto the customer because they will either be squeezed into bankruptcy or the effects of price increases will be more detrimental the longer they hold this off. To stay in business, they will have to increase their prices accordingly and the continued rise of inflation will only make things worst.
High inflation is often preventable with the right policies in place. It is unfortunate poor decision making has affected so many nations, including Nigeria. I am curious how the predicted growth of 2.5% compares to the rate of inflation.
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