The continued scarcity of naira notes and petrol in Africa’s most populous nation is crippling several businesses, especially in the informal sector.
Analysts are estimating a 20 percent drop in sales for consumer goods and 30 percent for cement manufacturers as the shortage of fuel and new notes worsens.
According to them, the scarcity of the currency notes and petrol is leaving critical sectors such as trade and agriculture particularly vulnerable. These sectors contribute significantly to the country’s Gross Domestic Product (GDP).
“The scarcity of the new notes and petrol is causing distortions to individuals, businesses and the economy at large,” said John Udeagbala, national president and chairman of the council of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).
“This will ultimately have an impact on investments,” he said in a response to questions, adding that it may affect the country’s investment rating and the kind of picture Nigeria is portraying as an investment-friendly nation. “We need to think deeply about these issues.”
Muda Yusuf, chief executive officer at Centre for the Promotion of Private Enterprise (CPPE), said the naira problem could put the country’s N100 trillion component of its national GDP at risk.
“The crippling of business transactions at the distributive trade end amid the currency crisis would not only undermine the trade and agricultural sectors but would also have a knock-on effect on the manufacturing value chain and the services sectors.
“This is because whatever is produced has to be sold. The trading end of the chain has been greatly disrupted by these crises,” he said.
Yusuf added that the trade sector contributes about 14 percent of the country’s GDP at an estimated N35 trillion while agriculture contributes 25 percent, valued at an estimated N62 trillion.
“Most of the activities in these sectors which are either in the rural areas or informal sector have been driving the resilience of the economy amid numerous domestic and global headwinds,” he said.
The Central Bank of Nigeria (CBN) on Sunday extended the deadline by 10 days from January 31, 2023, to February 10, 2023, to allow the collection of the old 1000, 500 and 200 naira notes.
Godwin Emefiele, the CBN governor in a statement, said the sensitisation exercise on the naira redesign by the apex bank has achieved a success rate of over 75 percent of the N2.7 trillion held outside the banking system.
The scarcity of the new notes is hurting businesses, especially those that are heavily cash-reliant.
For energy, the scarcity of petrol which has been prolonged since the fourth quarter of last year has seen its pump price increase to N300 per litre from N170. This has led to long queues across petrol stations and hikes in food and transport costs across the country.
Obinna Okereke, a Lagos-based barber said the naira and petrol scarcity has reduced his customers since last week.
“Point of Sales (PoS) operators in my area are charging an extra fee of N200 for N1,000, plus petrol is sold for N300 per litre at filling stations in my area. I bought petrol for N300 from an Oando filling station in Fin Niger area of Lagos State, today,” he said.
He added that the scarcity of the naira is also affecting his business because people are not willing to transfer N500 just for a haircut. “They would rather keep the money because of the scarcity.”
Elizabeth Olarinde, a fashion designer in Abuja complained of how she has been disappointing customers since the beginning of the year as she is unable to get fuel amid the constant blackouts even though her work requires steady electricity.
“I have been buying black market but it’s too expensive and it has been tampered with, and filling stations are not selling fuel in jerry cans and some that do charge N500 while selling it secretly, now I’m gradually losing customers because I have to increase prices and sometimes I disappoint my customers,” she complained.
Apart from reducing sales, Uzoma Queenpraise, chief executive officer at Nrindioma Kitchen, an online food delivery service said the scarcity has also increased her spending cost on food ingredients.
She said: “I spend more money to buy my food ingredients from the market. Yesterday, I paid N700 extra to get N15,000 from a PoS merchant because market women don’t usually take transfers; so getting food ingredients for my business is a struggle.”
Apart from the impact on investments, analysts say that the naira notes and petrol crisis could affect the projected easing of the country’s inflation rate.
Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said, “It is going to have a significant impact on inflation. We were already expecting a major deceleration in inflation but the scarcity could keep it elevated longer causing the actual economic performance of the country to underperform.”
According to the National Bureau of Statistics, Nigeria’s headline inflation rate slowed for the first time in 11 months to 21.34 percent in December 2022 from 21.47 percent in the previous month.
Last year, the World Bank said the country’s accelerated inflation growth pushed an additional five million Nigerians into poverty.
Yusuf of CPPE said the situation calls for an urgent intervention by President Muhammadu Buhari to save millions of Nigerians from the anguish and pain of the current stampede of currency swap inflicted by an unrealistic timeline and glaring capacity gaps in the management of the process.
“The vote-buying argument is not compelling enough to justify the scale of pain, agony, trauma and economic disruptions foisted on Nigerians by this currency swap pandemonium.”
Also, Chinyere Almona, the director-general at the Lagos Chamber of Commerce & Industry urged the business community to brace up for an economy with fewer cash, saying a stronger and more sophisticated financial system has benefits for the larger economy in the long run.
“The business community should brace up for an economy with fewer cash than with the period of old notes in circulation. The number of new notes coming to circulation will not be up to what we had with the old notes,” she said.