By Peter Owolabi
NIGERIAN businesses and Nigerians in general are having to deal with the economic realities in the wake of the COVID-19 pandemic. Nigeria’s economy pre-COVID was sputtering and barely growing.
In 2016, the country slumped into a recession that it was only just recovering from. Early projections in 2020 provided hope that an improvement was just around the corner.
The 2020 federal budget was developed with projections of revenue intake of N8.24 trillion, which was about 20 percent more than that of the previous year 2019.
The projections were made with a rise in global demand for oil in view, and a rather equable market, with the price benchmark of $57 and an output of 2.18 million barrels per day. The disruption in global economies then necessitated a review of these projections.
The Central Bank of Nigeria, CBN, adjusted the foreign exchange rate from N307 per dollar to N360. Today, the official dollar exchange rate is N380, and its current street value is about N475.
This continued rise had led to complications not only for the Nigerian government, but also for business owners who are import-dependent for their raw materials and production.
One such industry that is directly affected by this is the Pay TV sector. In spite of the attendant lockdown caused by the pandemic, broadcasting services like Startimes, Iroko TV, MultiChoice, and others could not stop operations.
The weakening of the naira against the dollar means that they will have to pay ‘more’ for the licensing of foreign content like live sports, movies and others which are priced in foreign currencies.
Coupled with the pandemic and naira devaluation, businesses also have to contend with rising inflation and increasing operational costs. This has led the two biggest Pay TV operators in the country to announce price adjustments about a month from one another.
In explaining Startimes’ recent price increase, the company’s Brand and Marketing Manager, Viki Liu said: “Our business is not exempted from the effect of the naira depreciation affecting all businesses in the country. All of our foreign content is bought in dollars and to continually serve our subscribers the best content, the subscription price has to be reviewed upwards.”
Multichoice, which is also adjusting the prices of some of its upper tier packages effective September 1, said in a message to customers that:“We periodically review our pricing, taking into consideration factors such as inflation and operational costs.
We acknowledge that the people of Nigeria are living under increased economic pressure and we have made efforts to freeze the subscription prices in the last year, barring any extreme factors such as devaluation of currency and changes to VAT mandated by the government.”
Since the year began, there has been a gradual increase in the price of consumer goods. Fares have all but doubled, coming on the heels of Okada(commercial motoycycle) and Keke(commercial tricycle) ban in Lagos, naturally making things harder for traders moving goods across the metropolis.
In March, due to an increase in operational costs and in order to save the entire operation from collapse, fares were increased across all routes for Lagos Bus Services Limited, LBSL, with a 46 percent price hike. A 50kg bag of rice previously sold for N18,000 is now N21,000, a tuber of yam that was as low as N300, now goes for N800.
Luxury items have not been spared from these price adjustments. Airfares have significantly increased since domestic flights resumed in July, with some airline operators raising prices by as high as 50 percent. The toll rate of prepaid users accessing the Murtala Muhammed International Airport, MMIA, was jacked up by 300 percent.
To many observers, the general hike in prices is little surprising, seeing as pump price of fuel has also increased from N123.5 to N143.5, while the National Bureau of Statistics, NBS, reports that Nigeria’s inflation rate rose in July 2020 to 12.82 percent from 12.56 percent in June 2020.
France, Italy, Canada, Germany, the US and Japan have all experienced slowed growth and suffered devastating losses to their economy, while in August, the UK officially entered into a recession.
According to Tunji Andrews, an economist and business analyst: “Nigeria will join soon as will most of the world. Recessions hardly ever happen in a vacuum. One event may be the catalyst but there are usually events unfolding up to it. For the UK, it was BREXIT, then COVID-19. For Nigeria, it was the madness in the oil market and then COVID-19.
Experts say that to avoid things getting even worse for business owners and citizens post-COVID-19, world governments must provide the much needed financial relief mechanisms to enable corporations survive the tough economic environment created by COVID-19.
KPMG’s Global Head of Private Enterprise and Head of Markets, Jonathan Lavender, writes: “It has become necessary for governments to introduce incentives and economic relief programmes that help alleviate business stress and bolster economies.
Additional financial relief mechanisms include corporate income tax rebates, deferral of government payments, and reductions in tax rates to help owners retain more immediate cash in their business.”
Owolabi, a social commentator, wrote from Lagos