Food Inflation, Black Tax & Unemployment — the key indices in Piggyvest’s Savings Report
At the moment, the second biggest enemy of many Nigerians is inflation. The first and biggest? — Food inflation.
Generally, Inflation is described as the general increase in the price of goods and services. In simpler terms, it means yesterday’s price (of a good or service) is not today’s price. However, food inflation, while sharing similarities with overall inflation, has its own subtle definition — the price of food in the morning is not the price of food in the evening.
Food prices are soaring and rising at an alarming rate. In October, the Nigerian Bureau of Statistics recorded food inflation at 31.52% on a year-on-year basis, which was 7.80% points higher compared to the rate recorded in October 2022 (23.72%). What this means is that the rise in the price of food has caused many Nigerians to spend more on the same quantity of food (or sometimes less) thereby reducing their purchasing power (money spent on other things like rent and shopping).
Unsurprisingly, a report by Piggyvest released in October 2023 proves this to be true.
According the report, 87% of the respondents named food as their biggest expense followed closely by utility and transport. How much then is spent on food? As reported by Premium Times, Picodi, an international e-commerce organization revealed that the average Nigerian household spends about 59% of its income on food. That’s N59,000 of every N100,000 on food. Whooping right?
Why is Food Inflation Soaring?
The soaring cost of food is attributable to a number of reasons, including the rampant insecurity in the North, the ongoing conflict in Ukraine and Russia, the elimination of fuel subsidies, the volatile exchange rate, rising inflation and even fiscal and monetary policy decisions.
In a discussion with an Aunt in 2020, she revealed to me that she had to close down her farm as a result of persistent attacks by bandits. Sadly, many farmers, farming communities and markets have towed this path and closed down their farms as a result of insecurity. A vast majority of the food produced in the country comes from the North, and since the region is most hit by attacks from bandits, there has been a decline in production causing the price of food to rise. In addition, the recent removal of fuel subsidy has forced motorist to increase the cost of transporting food and farm produce from one region to another thereby hiking the price of food. There is also the problem of post harvest losses which refer to the deterioration of food between harvest and consumption. This is mainly caused by poor road networks and inadequate storage facilities.
What is the way forward?
Without any doubt, a reduction in the price of food will ease the burden on many Nigerians and allow them spend on other things. To mitigate the impact of cost-push inflation on food prices, the government can implement short-term measures such as input subsidies for farmers to lower their production costs. Additionally, enhancing inter-regional transportation infrastructure through rail networks and providing adequate storage facilities can effectively reduce post-harvest losses and further contribute to food price stabilization in the long run.
Cost-push inflation occurs when the cost of producing goods and services goes up, leading to an increase in the overall price level.
On Black Tax
The issue of Black tax has since come under scrutiny after John Obi Mikel’s revelation about the financial expectations of his extended family. There is a common theory that many Nigerians do not pay tax. However, most Nigerians are (mandatorily) taxed from their income. Rising inflation is a also a sneaky form of tax as it lowers spending power. And then, there’s black tax; of which many cannot avoid paying. This is showcased in the report as over 80% pay black tax, which is simply 4 out of 5 persons.
Black tax is a financial burden/obligation placed on individuals to support (extended) family members.
It is obvious that the societal obligation of black tax places a strain on personal finances; but while generosity is a valuable virtue, it is essential to exercise financial prudence and maintain a realistic budget for such obligations.
On Unemployment
From the report, 80% of the respondents had at least a source of income which signifies that they are employed. This means that approximately 8 in every 10 Nigerian is presently employed. However, the highest income bracket of the respondents is less than N100k per month at 26%. Does this statistic corroborate with the recently released unemployment figures in the country?
A few months ago, The Nigerian Bureau of Statistics (NBS) changed its methodology for computing unemployment figures by adopting the International Labour Organization (ILO) standard. At first, to be considered employed, one had to work at least 40 hours per week. However, the latest methodology recognizes that even working just one hour per week constitutes gainful employment. This change meant that unemployment figures fell from 33% to 4%. Therefore, the key question that needs to be addressed is: Is the majority of the Nigerian workforce employed or underemployed?
