According to the Consumer Price Index Report released by National Bureau Statistics, Nigeria’s inflation rate for the month of March 2021 rose to an all-time high of 18.17% from 17.33% recorded in February. This represents a 0.82% increase from the rate of the previous month, which marks the highest annual rise in prices since January 2017.
Inflation, in double digits since 2016, reached 17.33 percent, driven by the impact of the coronavirus epidemic that has also induced a drop in the price of oil, Nigeria’s main export, and weakened the naira currency.
On a month-on-month basis, the Headline index increased by 1.56% in March 2021, this is 0.02% points higher than the rate recorded in February 2021 (1.54 percent).
Food prices, which make up the bulk of the inflation basket, rose 21.79% in February, causing food inflation to hit a nearly 16-year peak at 22.95%.
On a month-on-month basis, the food sub-index increased by 1.9% in March 2021, up by 0.01% points from 1.89% recorded in February 2021, this rise was caused by increases in prices of bread and cereals, potatoes, yam, and other tubers, meat, vegetables, fish, oils and fats, and fruits.
Jacques Nel, head of Africa macro at Oxford Economics, stated: “Inflation is expected to remain at uncomfortable levels over the short term as the exchange rate depreciates and oil and food prices increase. The CBN may also impose additional FX restrictions and import bans, which could exacerbate domestic product shortages.”
The inflationary pressure was compounded in 2020 as a result of the covid-19 pandemic, which crippled the supply chain and halted business activities in most aspects of the economy.
What does this mean?
- Nigeria’s inflation rate is an indication of the diminishing purchasing power of Nigerians.
- Higher operational costs for businesses results in higher production expenses and reduced profitability. Business owners might need to review their cost of production and adjust prices accordingly.
- Sometimes, businesses with price as a competitive advantage lose their edge due to reviewed prices.
- Inflation results in product Scarcity.
- Increased inflation rate and a further increase in the country’s unemployment rate at 33.3% is a major cause for worry as to the direction the economy is taking.
How then do small business owners overcome inflation?
Inflation can be unpredictable and sometimes businesses simply can’t see it coming. But with a solid edifice in place and by adapting to the circumstances, there are various ways of reducing the impact on your business.
Steps small business owners can take in order to properly deal with the rise in inflation are;
- Plan and Assess – Check you’re your cash flow, streamline areas of your business that need it and check productivity levels to see if this can be improved in any way. Spend time improving your processes. Think about areas of waste and how work can be done more efficiently.
- Prepare and React- Does your business have procedures in place to deal with the rising rate of inflation?
- Small Price Increases – Increase your pricing gradually over a long period of time to enable your customers adapt to the increase.