No nation has ever succeeded in taxing its citizens into prosperity. The foregoing wisecrack becomes apposite in describing the challenges facing businesses lately as they are made to bear all manner of overhead costs, which they end up passing to the final consumers.
By Ibrahim Apekhade Yusuf
From retail businesses, road and air transport fares, logistics and whatnots, prices have soared increasingly high with consumers bearing the brunt.
Expectedly, one causative factor has remained constant and resonates with everyone: the outbreak of the coronavirus pandemic is having rippled negative effects on businesses especially on the prices of fast moving consumer goods and services.
Besides, over the years, businesses and investors operating in Nigeria have had to combat currency fluctuations, amid incessant devaluation efforts.
In June, the Central Bank of Nigeria adjusted the value of the naira to exchange to the dollar at N381, as part of measures to converge the nation’s multiple exchange rates and ensure stability. Although the CBN did not officially make its position known, data obtained on the website of FMDQ OTC Securities Exchange on the CBN official rate showed a 5.54 per cent change from N360/$ to N381/$.
The new rate is believed to be in line with the apex bank’s efforts to unify the exchange rate as the foreign exchange spot. On Tuesday, the dollar was quoted at N380.69k at the Secondary Market Intervention Sales (SMIS), where importers access foreign currencies.
Earlier in March, the CBN had adjusted the official exchange rate to N360/$ from N307/$ and abolished the N325 and N330 concessionary rates.
The fluctuation and multiple exchange rates have had an enormous impact on businesses and industry, especially those who rely essentially on importation.
Luxury goods and services most affected
Nigerians have since experienced a spike in prices of goods and services, which operators blame largely on inflation, currency fluctuation, among other combination of factors.
Take air transport for instance, the Federal Airports Authority of Nigeria (FAAN) last Monday hiked the toll rate of pre-paid users accessing the Murtala Muhammed International Airport (MMIA), Lagos, by 300 per cent. The one-off yearly renewal that erstwhile cost N10, 000 per private vehicle, now costs N40, 000.
The authority, which caters for about 10000 workforce nationwide, has been cash-strapped since COVID-19 restricted both local and international commercial flights, with attendant revenue loss.
Operators at the airport and other regular users of the Lagos access toll plaza found that a section of the tolling has increased, while the regular pay-as-you-go booth rates remain the same.
FAAN earlier raised Passenger Service Charge (PSC) by 100 per cent. The management, in a memo, notified airlines that effective August 1, 2020, PSC rate would increase from N1000 to N2000 for domestic flight passengers and from the former $50 to $100 for international travellers.
If airfares shot to the roof tops, the prices of retail goods, staple foods, etal, were also not left out as most of the household items which are regular features in family menu such as beverages, dairy products, sanitary wares, detergents, have had their prices hiked tremendously.
Like most businesses, pay TV operators have considered price increase. StarTimes had few weeks ago announce plan to upwardly review its prices from August 1.
Justifying the increase, the Marketing Manager of StarTimes, Viki Liu, said the sharp drop in naira to dollar exchange rate had forced the brand to adjust some of its bouquet prices upwards.
Speaking about the challenges the company is facing in its quest to provide cable TV entertainment to subscribers, the StarTimes marketing manager said that earlier this year, the Federal Government increased the rate of the Value Added Tax (VAT) from 5 per cent to 7.5 per cent, which she said had effect on its cost but that in consideration of its customers’ plight, StarTimes continued to bear the extra cost.
Although some related businesses like MultiChoice is yet to raise its rate, economic watchers hold the view and very strongly too that the South African-owned pay TV may be forced by the present economic circumstances to consider an increase if it must stay afloat.
The devil is in the details
It is however instructive to note that the consumer price index (CPI) which measures inflation increased by 12.56 percent (year-on-year) in June 2020, according to the latest report released by the National Bureau of Statistics (NBS).
The percentage change in the average composite CPI for the twelve months period ending June 2020, over the average of the CPI for the previous twelve months period was 11.90 percent, representing a 0.11 percent point increase from 11.79 percent recorded in May 2020.
The urban inflation rate increased by 13.18 percent (year-on-year) in June 2020 from 13.03 percent recorded in May 2020, while the rural inflation rate increased by 11.99 percent in June 2020 from 11.83 percent in May 2020.
On a month-on-month basis, the urban index rose by 1.23 percent in June 2020, up by 0.05 from 1.18 percent recorded in May 2020, while the rural index also rose by 1.19 percent in June 2020, up by 0.03 from the rate recorded in May 2020 (1.16) percent.
“This is the highest it has risen in 24 months. This is as a result of the national lockdowns and border closure in order to curb the spread of the Coronavirus in the country. Other factors which may have affected the food price is the insecurity in the central and northwestern part of Nigeria,” the NBS report stated.
The report also stated that the Composite Food Index also rose to print 15.03% in April 2020 from 14.98% in March 2020.
“The rise in the index was caused by increases in the prices of potatoes, yam and other tubers, bread and cereals, fish, oils and fats, meat, fruits and vegetables.”