Lagos, Nigeria – Every morning Esther George gets up before dawn to prepare a cooler of rice and a large pot of beans, as well as yams and a variety of other staple foods to reheat and sell to customers from a roadside table in Lagos.
Before the coronavirus pandemic, the mother of three would clean up a monthly profit ranging from about 10,000 ($ 24.40) to 15,000 naira ($ 36.60), she said. But this year, she has fallen deeper and deeper into the red, with monthly deficits between 30,000 ($ 73) and 40,000 naira ($ 97.40).
The reason – rising food prices.
“Previously [the pandemic], we bought a derica earlier [a local measurement named after a brand of tomatoes ] beans for 300 naira ($ 0.73). Now we buy it for 600 ($ 1.50). The price of two is now the price of one, ”said George.
And she’s getting ready for more price increases.
“What you used to buy for 500 naira ($ 1.20), tomorrow it will be 550 ($ 1.34), the next day it will be 600 naira, and so on,” she told Al Jazeera.
Nigeria’s annual inflation rate reached 16.3 percent in September. Although lower than this year’s 18 percent high in March, higher prices for food, fuel and other raw materials are hurting small business owners, forcing them to either cut back on production, fall into debt, or pass on cost increases to customers which also feels pressured.
George tried to reduce expenses by producing less and dropping some items from her menu – such as eggs. She used to sell an average of ten dericas beans a day, but dropped back to five. And even if she could afford ten, she could not absorb the cost of the three butane-propane gas cylinders needed to reheat that volume of food – because prices for the fuel cylinders had tripled.
Global price pressure, local pain
George, like millions of small and medium-sized business owners in Nigeria – not to mention, all over the world – had to persevere and adapt to the pendulums and arrows of COVID-19 pandemic disruptions and distortions.
Nigeria’s economy shrank by 1.8 percent in 2020 – the sharpest decline since 1983 – and is expected to grow by only 2.5 percent this year, according to the International Monetary Fund.
One obstacle to growth is rising prices. As nations imposed virus restrictions, the supply of raw materials did not keep pace with demand, which led to rising prices for food, fuel and other raw materials.
Global food prices reach a decade high last month, according to the United Nations.
Nigeria also has local factors that exacerbate the pain of world price pressure.
“Non-economic factors such as uncertainty have affected the economy and contributed to inflation, because farmers, for example, cannot go to farms because they are afraid,” said Sheriffdeen Tella, a professor of economics at Olabisi Onabanjo University.
Tella told Al Jazeera that monetary policy and exchange rate management had further contributed to Nigeria’s economic problems.
“The economic factors include the exchange rate. First, the Central Bank devalued the currency, causing a high inflation rate. And most products are exchange rate dependent because they are import dependent, ” he said.
All of this makes it a particularly difficult time for the small and medium-sized businesses that account for 96 per cent of businesses in Nigeria and 84 per cent of jobs.
On top of that, passing on higher raw material costs to consumers poses risks because it can force customers to either take their business elsewhere or simply go without.
“The fear is that if these are products that people can do without, it will be difficult to pass on the costs to the consumers,” said Tella.
This fear is felt by Oluwaseun Kareem, who runs a printing plant in Lagos.
In June, when a belt of paper cost 5,100 naira ($ 12.4), he got a contract to provide monthly notebooks for a school at a fixed price. By October, the price of a belt of paper had climbed to 7,000 naira ($ 17) – wiping out its profits.
” I went to school and told them I could not continue with the work because of the price margin. For me to continue with that work, it means that all the profit I will earn will be spent on [buying] paper, ”the 41-year-old told Al Jazeera.
Kareem said the school understood his situation and agreed to suspend the contract until further notice. But this is not the only business he has lost.
“I lost a lot of opportunities,” he said. “When you came in, did you see me doing something? I slept. The people I work for are not ready [to pay the new prices]. ”
Official inflation, market realities
Although September’s inflation rate was not as blistering as in March, Tolulope Afolayan, a business analyst, questioned the official figures.
“The market realities show evidence against the numbers portrayed,” she told Al Jazeera. “I do not think the figures we used in our economic measurements are integrity.”
Rising prices have also sown uncertainty in the outlook for small businesses, she said, making it harder for them to navigate inflation effectively and stay afloat.
“It’s not sustainable that a business owner can not reasonably predict what their business will be like in the next six months, which is very important for a business,” she said. “For example, a bag of beans was sold at a stage for 100 000 naira. I don’t think six months ago any bean seller saw it or even realized if it could be possible. “
While George hopes conditions will improve for her and other small business owners, she has little choice but to abide by the current crisis and keep going for as long as she can.
“I did not stop the business, because where is the alternative?” she said. “There is nothing I can do.”