The last figures I saw showed inflation, particularly food inflation, inching close to 40%, while other headline inflation rates were averaging in the late 30s.
I wonder why nobody is talking about a recession. Things weren’t this bad during Buhari’s time when we readily announced that we had entered a recession.
Today, the economy is flat. The main economic drivers—fuel prices and forex—seem to have taken on a life of their own, escalating at alarming rates.
Government spending is spiralling out of control, and a recent trend of non-elected individuals with close ties to the government donating huge sums is showcasing the profligacy that appears to be fueling this spending.
But wait, this situation has also unveiled less obvious, but impactful, “tiny devils”—replacement costs and fear. They feed into each other.
The lack of government sincerity and coherence has led to a widespread lack of confidence in its ability to tackle issues at all levels of economic activity, resulting in a fear of replacement costs taking over.
The weakening of economic discipline has caused even the smallest players to mark up their prices beyond normal market forces, to ensure they aren’t stranded when it comes time to replace goods or services or to afford other skyrocketing essentials.
Here are three examples at the micro level:
I needed to change my eyeglass frames, so I took two pairs to an optician at the military hospital and one to a roadside vendor.
Before Tinubu, the average price for this service would have been around N1,000 or less, but the optician charged N12,000 for two pairs, and the roadside vendor took N25,000 for one.
Do you see the fear at play?
Next, I needed batteries for my car keys. The dealership technician told me to buy them from a supermarket for N2,000, but since I didn’t have time, I asked him to help. He charged me N25,000, citing transportation costs and the need to sync them with their machine.
Lastly, my inverter fuse blew due to an overload. The fuse itself should cost no more than N5,000, but I was charged N35,000.
What am I getting at here? The reported 40% inflation rate could be discounted by as much as 20% if you factor in this psychological element. Out of fear, prices are being inflated to maintain buying power and ensure affordability for other goods and services, which are also rising.
This fear is rooted in a loss of confidence in the government, which during its honeymoon period and beyond, introduced a series of inconsistent policies that signaled an inability to handle the economy effectively. This loss of confidence has led to widespread indiscipline, affecting the pricing of goods and services.
The government should urgently remove vested interests from policy formulation, especially in policies affecting major economic drivers like fuel and forex.
A transparent approach would restore the stability needed to encourage proper planning and economic discipline.
This is crucial if we want to restore sanity to the economic space. But the looming question remains: does the government have the political will and internal capacity to push for this?
Let me stop here.