Amidst the rapidly evolving economic climate of 2023, a number of factors have played a significant role in shaping the lives of Nigerians. These include a range of issues, such as cash shortages, the removal of petrol subsidies, currency devaluation, and more. Here is a closer look at seven of the most impactful economic developments in Nigeria this year.
1. Naira Scarcity Disrupts Economic Activities
The Central Bank of Nigeria's (CBN) naira redesign policy led to a chronic cash shortage in the first quarter, disrupting economic activities. Despite subsequent efforts to address the shortage, many Nigerians still face challenges accessing cash, with banks reportedly rationing it.
2. Soaring Inflation Impacts Cost of Living
Rising inflation, driven by higher petrol prices and foreign exchange costs, has significantly weakened the purchasing power of Nigerians. The National Bureau of Statistics reported a headline inflation rate of 28.2 percent in November, reaching an 18-year high. This has led to a less favorable cost of living and a reduction in business activities.
3. Foreign Exchange Scarcity Hits Manufacturing
The persistent scarcity of foreign exchange and the devaluation of the naira have adversely affected manufacturing activities. Manufacturers face challenges sourcing forex, contributing to a decline in the sector. Notably, six out of 10 fast-moving consumer goods firms posted losses, reflecting the broader impact on businesses.
4. Petrol Subsidy Removal Raises Transportation Costs
The removal of petrol subsidies tripled pump prices, impacting public transportation costs. Commuters now face higher fares, with the average fare for bus journeys within the city rising by 61.3 percent in November. This increase has led to a significant allocation of salaries for commuting expenses, affecting disposable income.
5. Job Losses Amid Tough Business Environment
The challenging business environment has forced many small businesses to close, exacerbating unemployment. Approximately 25 percent of manufacturing businesses have shuttered in 2023, leading to a significant rise in job losses. The tough economic conditions have prompted downsizing and reduced production capacities.
6. Spike in Drug Prices Affects Healthcare
As the naira continues to depreciate, the pharmaceutical industry struggles to keep essential drugs affordable. Prices for crucial medications, including asthma inhalers and antibiotics, have surged, impacting access to healthcare. The rising cost of drugs has compelled some individuals to explore alternative health solutions.
7. Further Rise in Poverty
Rising inflation has pushed an additional 14 million Nigerians into poverty in 2023, according to the World Bank. The number of poor people rose to 104 million, emphasizing the disproportionate impact on vulnerable households. Targeted cash transfers have been initiated to mitigate the impact on the most vulnerable.
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