Dear Subscriber,

Cost of living outstrips wages

The general price level (inflation) in Nigeria has increased by 21.09% in the last year. This means that the Naira you had in your pockets in 2021 is now worth only N79 in real terms. This is happening, at a time when wages have been stagnant. Nigerians, like all rational economic agents, have responded to these challenges in two ways. First, by switching consumption to cheaper substitutes and secondly, by reducing the quantity purchased. The cumulative effect of these moves will be a reduction in the aggregate supply of goods and some retrenchment of staff in the short run. In the long run though, inflation will ease and things will return to normal. For Unity bank clients in the retail sector, it is time to adjust prices to keep market share normal and hope for the best.

Festive demand looks bleak

The “EMBER” months (September through December) are typically known for a spike in demand as people stock up for the holiday season. However, as inflation bites, and real income shrinks, we expect consumer demand to remain subdued in this festive season and into 2023. The redesign of the Nigerian high-value currency denominations, an initiative that takes effect from December 15, may disrupt retail sales. Retailers may refuse to accept the old denominations earlier than required due to the difficulties involved in changing the old Naira notes. Alternatively, retailers may resort to multiple pricing, which could compel holders of old notes to pay more for the same goods than holders of the new notes. This may reinforce weak consumer demand.

The markets have punished the Naira again

After what could be described as a dead cat bounce, with the Naira gaining 26.24% in one week, the Naira has plunged once again this time with vengeance (losing 15.4%) to the current level of N796/$ on the back of increased dollar demand.

This is despite the CBN’s initiatives to support the Naira, including the clamp down on Bureau De Change operators by the EFCC. Meanwhile, the Naira is expected to remain weak as forex demand continues to outstrip supply. During the Christmas season normally, the Naira appreciates as visiting friends and relatives from the U.S. and Europe return to Nigeria. But, 2022 is an extraordinary year. So, what you see will be what you get.

This edition of the Unity Bank Digest provides you with interesting entertainment stories, lifestyles and economic highlights.

Please enjoy your read!