As inflation bites, Nigerian small businesses struggle to survive New Foods

Lagos, Nigeria – Every morning, Esther George gets up before dawn to prepare a fresh rice and a large bowl of beans, as well as yams and many other staple foods to heat and sell to customers from a table on the road to Lagos.

Prior to the Coronavirus pandemic, the mother of three children would have removed approximately 10,000 ($ 24.40) and 15,000 naira ($ 36.60) gains, she said. But this year, it has fallen deeper and deeper into the red, hitting monthly deficits of between 30,000 ($ 73) and 40,000 naira ($ 97.40).

The reason – rising food prices.

“Before [the pandemic], we bought a derica [a local measurement named after a brand of tomatoes ] 300 naira beans ($ 0.73). We are now buying 600 ($ 1.50). The price of two is now one, ”George said.

And it is preparing for a further rise in prices.

“Before you buy 500 naira ($ 1.20), tomorrow will be 550 naira ($ 1.34), tomorrow naira will be 600 naira, and so on,” he told Al Jazeera.

Nigeria’s annual inflation rate reached 16.3 per cent in September. Although it is lower than its 18 percent peak in March this year, higher food, fuel and other commodity prices are squeezing small business owners into forcing customers to cut production, drop debt or reach cost increases. they also feel tight.

George has tried to reduce expenses by producing less and removing some items from his menu, such as eggs. On average, he sold ten derica beans a day, but reduced it to five. And even if he can afford ten, he can’t absorb the cost of the butane-propane gas bonds needed to renew that volume of food because fuel prices have risen threefold.

Global price pressures, local pain

George, like the owners of millions of small and medium-sized businesses in Nigeria, not to mention the rest of the world, has had to persevere and adapt to the disruptions and arrows of the COVID-19 pandemic disruption and arrows.

The Nigerian economy shrank by 1.8 percent in 2020 — the biggest decline since 1983 — and is expected to grow by only 2.5% this year, according to the International Monetary Fund.

One of the obstacles to growth is rising prices. As nations have ruled out restrictions on viruses, the supply of raw materials has not kept pace with demand, and the prices of food, fuel and other raw materials have risen.

Global food prices it hit a decade high last month, according to the United Nations.

Nigeria also has local factors that are exacerbating the pain of global price pressures.

“Non-economic factors like insecurity have affected the economy and contributed to inflation, for example, because farmers are afraid they can’t go to farms,” said Sheriffdeen Tella Olabisi, a professor of economics at Onabanjo University.

Overview of a food market in Lagos (Nigeria) on 30 March 2020 [File: Temilade Adelaja/Reuters]

Tella told Al Jazeera that monetary policy and exchange rate management have further contributed to Nigeria’s economic problems.

“Among the economic factors is the exchange rate. First, the Central Bank devalued the currency, which led to a high rate of inflation. And most products are dependent on the exchange rate because they are dependent on imports, ” he said.

All this is very hard for small and medium enterprises that take up 96 per cent of Nigerian businesses and 84 per cent of jobs.

In addition, the risk of reaching higher raw material costs for consumers carries risks, as the customer may have to move the business to another location or simply go without it.

“The fear is that if there are products that people can leave without, it will be difficult to transfer the costs to consumers,” Tella said.

This fear is felt by Oluwaseun Kareem, who runs a printing house in Lagos.

In June, when a piece of paper was worth 5,100 naira ($ 12.4), he was awarded a contract to supply monthly notebooks for a school at a fixed price. By October, the price of a piece of paper had risen to 7,000 naira ($ 17), eliminating its profits.

” I went to school and told them I couldn’t keep working because of the price margin. Continuing in this work means that all the profits I get will be spent [buying] paper, ”the 41-year-old told Al Jazeera.

Kareem said the school understood his situation and announced that he had agreed to suspend the contract. But it’s not the only business that has lost that.

“I’ve missed a lot of opportunities,” he said. “When you came in, did you see him do something? I was asleep. The people I work with are not ready [to pay the new prices]. ”

Official inflation, market realities

Although the September inflation rate is not as dramatic as it was in March, business analyst Tolulope Afolayan questions the official data.

“They are showing evidence against the numbers that are representing the realities of the market,” Al Jazeera said. “I don’t think the numbers we use in our economic measurements have integrity.”

Rising prices have also sown uncertainty in small business forecasts, he said, making it harder to navigate inflation effectively and move forward.

“It’s not sustainable that a business owner can’t reasonably predict how his or her business will be in the next six months, and that’s very important for a business,” he said. “A bag of beans, for example, sold 100,000 naira at one point. I don’t think a bean seller saw that six months ago, or even guessed if that was possible. ‘

Although George hopes that conditions for himself and other small business owners will improve, he has no choice but to cope with the current crisis and hold on as long as he can.

“I didn’t stop the business, where’s the alternative?” he said. “There’s nothing I can do about it.”