What do you believe is the single most important factor driving up the cost of living in Nigeria?

“Subsidy is gone”, President Tinubu echoed on May 29^th, 2023. The highlight of his inauguration speech stated that subsidy on petrol was gone, and Nigerians would begin to buy petrol at a higher price which would be determined by the forces of demand and supply.

Due to the effects of subsidy removal and the immediate floating (devaluation) of the naira, the price of goods and services hit the roof and the purchasing power of Nigerians was eroded and birthed high inflation through cost-push inflation which results from the general increase in the factors of production and transportation.

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The necessary inputs required to produce goods and services went up and led to an increase in consumer prices, thereby eroding the purchasing power of Nigerians.

The devaluation of the naira led to a loss in the purchasing power of Nigerians. As the value of the naira reduces, imported goods become more expensive and out of the reach of Nigerians. The floating of the naira and its volatility causes uncertainty for business owners and investors, it makes it difficult for planning and budget.

The effects of high inflation led to high MPR and high cost of capital. The Central Bank ofNigeria raised its monetary policy rate (MPR) to 26.25% during its 295^th meeting of the monetary policy committee. With MPR at over 26%, companies will access loans at over 32% because banks will make up the MPR for interest and risk on loans.

It would be difficult for companies to borrow or scale at such high interest rate. According to Manufacturers Association of Nigeria (MAN), over 800 companies have closed in the past 1 year.

Loans are a major economic booster and a critical part of our macro-economic cycle. Without loans, money lies dormant in the bank without use and industries collapse. The collapse of industries leads to high unemployment rate, crime and low source of revenue to the government.

Excessive taxation could lead to the closure of companies in this unfavorable business environment. Government must pay top priority to the existence and survival of companies. There must be a deliberate policy action to ensure that companies are protected from over taxation and multiple taxation.

During the administration of Donald Trump in 2017, the federal corporate tax in the USA was reduced from 35% to 21% to help business stay afloat.

Nigerian government must give incentives and tax holidays to businesses and make them profitable and competitive. When companies are taxed out of existence, the multiplier effect will be high unemployment, crime and low revenue to government.

With interest rate at over 35%, zero subsidy on petrol and diesel, high electricity tariff, unstable and a volatile naira, porous borders and low purchasing power of Nigerians, it would be difficult for companies to stay afloat and scale in this harsh business environment.

The government must re-prioritize its policies and take urgent steps to fixing our railways and refineries to reduce cost of transporting raw materials and food items from one part of the country to another.

The government must take urgent steps in fixing the poor power situation and increase investment in agriculture to improve productivity.