On May 29, 2023, President Bola Tinubu’s removal of fuel subsidy and unification of foreign exchange rates sent shockwaves through Nigeria’s economy. Petrol prices skyrocketed, leading to a cost-of-living crisis affecting millions. The World Bank warned of increased poverty risk, with inflation hitting an 18-year high.
In a bid to stabilize the economy, the Central Bank of Nigeria removed the rate cap on the naira, causing a sharp depreciation and further inflationary pressures. The government’s 2024-2026 outlook predicted a slowdown in economic growth and a rise in inflation to 30%, while the IMF expected GDP growth to drop to 2.9% by year-end.
Businesses bore the brunt, facing higher production costs and job losses. Manufacturers reported increased inventory and foreign exchange losses, with major companies declaring significant financial setbacks. By August 2023, business confidence had declined, leading to widespread price hikes across various sectors.
Major companies, including Seven-Up Bottling Company, Google, and Nigerian Breweries, announced price increases. Multichoice Nigeria raised subscription fees, citing forex difficulties. The ripple effect continued with StarTimes implementing price hikes, contributing to lower consumer spending and declining sales volumes.
Industry experts, including the Director-General of Nigeria Employers Consultative Association and a finance expert at the Pan-Atlantic University, expressed concerns over the challenging business environment. They anticipated more closures and temporary unemployment as companies struggled with increased production costs and reduced consumer purchasing power.
Dr. Ikenna Nwaosu of the Nigeria Economic Summit Group highlighted the potential impact on the educational sector, affecting students going overseas. Businesses, both large and small, now face economic uncertainties, with investments and entry into the market slowing down. While long-term benefits are anticipated from subsidy removal and currency unification, the immediate concern for businesses is survival in the face of these challenging economic conditions.