Pulse List: 5 reasons why things are getting more expensive

Although the world is generally witnessing a simultaneous growth in inflation rate, reasons for the increased rate differ between countries.

These are the reasons why everything is getting more expensive in Nigeria:

The Minister of Finance, Zainab Ahmed, disclosed that the federal government has quietly withdrawn electricity subsidies. This means that everyone who pays for electricity has nearly doubled in bill figures now.

Businesses as well suffer the increased cost, and then factor the increment into the cost of their services and products. Hence, forcing the general public to buy the same products at a more expensive rate than they are used to.

The steep devaluation of naira has led to a decline in the value of the currency, especially in international trade scenes.

This makes exports more competitive and imports more expensive. The CEO of The Tokunbo Guy, Mr Mfonido Elijah, explained that the 2021 Mercedes-AMG GT 43 sedan has cost $89,900 since last year.

However, the price, when converted to naira would have risen almost twice the total cost. Generally, a devaluation is likely to contribute to inflationary pressures because of higher import prices and rising demand for exports.

Worldwide energy prices have been on the increase, way before Russia invaded Ukraine on February 24, 2022.

The invasion, however, caused the price of crude oil to skyrocket. A barrel of crude oil, the primary raw material for gasoline and diesel fuel, traded above $130 early this month; this compares to $92.31 a barrel a month before or $72.36 a barrel three months ago.

The Minister of State for Petroleum Resources, Timipre Sylva, explains that the surge in diesel price is not peculiar to Nigeria. In his words, “Diesel is a deregulated product and therefore when prices go up internationally, it affects the price in Nigeria.”

It is also important to know that diesel is not in any way subsidized by the federal government, unlike petrol.

Businesses that need diesel for manufacturing, logistics, and general operations will definitely be spending more money on diesel. The excess amount spent on running power and energy will be charged to customers via the price of the products. This, in addition to the high electricity tariffs, would organically cause a surge in prices of everything.

The Middle Belt is the food basket of the nation, and food prices will continue to rise if the security unrest persists.

Food costs have risen due to conflict between farmers and herders in the agricultural sector, as well as the ongoing insurgency by Boko Haram. Farmers are forced to leave their farms, therefore making the supply of food way below demand. For this reason, prices of food stay on the rise.

Last year, a report by the World Bank said that the Central Bank of Nigeria’s exchange rate management policies continues to discourage investment and fuel inflation.

The report suggested that CBN considers introducing policies that would ensure enough flexibility into FX management to sustainably respond to external shocks rather than focusing on policies to control demand for forex only.

The increase in the foreign exchange rate leads to cheaper domestic goods for foreign consumers, resulting in the increase of exports, total demands, and prices for even local consumers.