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Inflation, Diesel, Other Market Forces Escalate Cost of Services

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Global Economic Woes

With only about a month before the end of 2022, it is difficult for the year to be remembered for anything other than the war in Ukraine and the chaotic shock waves that inflation drove into the fabric of the global economy.

Largely driven by surging costs in prices of food and utilities, the situation was aggravated at the time the global economy was starting to show signs of recovery following the gripping Coronavirus induced recession.

Inflation figures in the US reached new levels not experienced in forty years, as the Bureau of Labour reported 8.6% for the month of May 2022, the highest since 1981. In the UK, it has been a similar scenario, with 9% inflation quoted for May 2022, the highest since 1982.

It is pretty much the same across the globe with Spain, Greece, France, Portugal among others, all caught in the web of inflation. Turkey’s jarring 54.8% is easily the worst among all countries captured in the report.

Double whammy for businesses in Nigeria with no silver bullet in sight; inflationary pressures as a result of currency devaluation, increased diesel and energy costs and food inflation due to insecurity.

Bringing it closer to home, the alarm bells are ringing for Nigeria, with the National Bureau of Statistics recording the inflation rate at 20.77% for September 2022 while analysts project 21.32% for October 2022.

Although Nigeria is faring better than neighbouring Ghana, whose inflation figure stands at 40.4% for October 2022, the implications of this on the cost of doing business in Nigeria are significant.

More challenging is the proposed 17.4% increment in electricity tariff for businesses within the EKO Electricity Distribution Company area, effective 1st January 2023, in-line with the July 2022 review of the Multi-Year Tariff Order by the Nigerian Electricity Regulation Commission (NERC).

This will adversely impact the formal economy, by increasing the cost of doing businesses within the jurisdiction of the power distribution company, forcing such businesses to contend with trade-offs to deal with these higher costs.

With diesel generators being the leading source of backup power in Nigeria and a litre of diesel selling for between N780 and N800, the situation has exacerbated to the point that some of the financial institutions, hitherto thought to operate above the high cost of doing business in the country, have had to reduce their hours of operation to save costs.

With power being a critical part of operations for most companies either in telecommunications, media, banking, manufacturing and tech, the impact on bottom line is huge when the cost of diesel and power subscriptions are factored into monthly and annual expenditure.

More unsettling is the fact that inflation, as far as Nigeria is concerned, has continued to grow almost on a monthly basis. The September 2022 figure at 20.77%, the highest in 17 years, was up from the 20.52% posted for August 2022 and 19.64% for July 2022.

If inflation, high cost of diesel and increase in electricity tariff are the factors businesses in Nigeria have to grapple with, their journey towards margins, the basic rationale behind setting up a business, would be considered tortuous by any analyst. How much so when the thorny issue of currency devaluation is added to the mix?

With the currency devaluation, Nigerians have seen the Naira exchange for dollar at the rate of N438 to $1, up from the prevailing N413/$1 rate a few months back at the official market. However, this is now only the case on paper, with the crushing unavailability in official markets leading to a surge in the parallel markets.

Although there has been a reprieve of sorts for the Naira in the last few days, the currency is still being exchanged for between N710 and N780 in the parallel market.

Africa’s growing digital economy is not immune from the impact of these cost pressures

With Nigeria being one of Africa’s largest ICT markets in terms of telecom subscribers and internet users, the surging prices are placing tremendous pressure on the industry. Telecom operators, data center providers and companies running their own ICT infrastructure are facing this onslaught of high prices.

At a time when digital transformation is viewed as critical for the economy to improve its productivity, the sector is under pressure from higher costs which it is seeking to pass on to businesses and consumers.

Unlike the banking industry and brick and mortar establishments that are able to cut back service hours, networks and data centers are required to run 24X7 whether they are utilized by a handful or millions of customers and subscribers and these always-on operations are placing tremendous cost pressures on these companies.

For businesses, even more than for households, it is a case of double jeopardy as they have to bear the cost of back-up power with diesel, while also covering the increasing costs of grid electricity, or at least the little or nothing of it which they enjoy.

It is remarkable that Nigeria has witnessed the entrants of many new data center operators in recent times and there are questions if these operators will be able to get services off the ground with low public power availability and high costs of diesel back up.

Tough decisions ahead

These developments are forcing data service providers, manufacturers, FMCGs, similar to businesses in Europe, to review prices as the only way to stay afloat, while ensuring continuity of services to customers.

As the year comes to an end and businesses put together their strategies for the year ahead, some difficult decisions need to be made, to weather the stormy waters that lie ahead.


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d.light Provides 10,000 Solar Home Systems to Refugees

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d.light, the global provider of transformational household products and affordable finance for low-income households, is providing 10,000 subsidized solar home systems to refugees who have fled conflict in South Sudan and the Democratic Republic of Congo and who are now living in refugee camps in Northern and Western Uganda.

The 10,000 units are part of a wider initiative to supply 23,000 solar home systems to Ugandan refugee communities.

The project is being funded by a USD$3.4M grant from Private Sector Foundation Uganda (PSFU), a body made up of business associations, companies and public sector agencies in Uganda: and Energising Development (EnDev), an international programme by the German, Dutch, Norwegian and Swiss governments to provide access to affordable, reliable, sustainable energy for delivering social, economic, and environmental change.

The project began in April and is scheduled to run for 12 months. Funds from the grant are subject to results based financing (RBF) and d.light will only receive funding for solar home systems that have been installed.

Each solar home system from d.light features three high-efficiency LED lights, an FM radio with MP3 playback, mobile phone charging capability, and a portable solar flashlight.

Commenting on the news, d.light’s Managing Director for Uganda Douglas Gavala said, “With this grant, we can expand the important work we’re doing to improve living conditions for underserved refugee communities from South Sudan, the DRC and elsewhere who are living in refugee camps in Uganda.

“A solar home system significantly improves the quality of life and wellbeing of a household – whether it’s providing entertainment or letting a family stay up to date on local and global news on the radio or enabling children to continue reading and studying after dark.

“As well as benefits at home, d.light products also bolster household income in Uganda’s refugee settlements by extending working hours for tradespeople and small businesses, and providing an income for residents who work as d.light salespeople in the settlements.

“By providing high-quality solar products at an affordable price, we are improving the quality of life for displaced people while simultaneously encouraging economic activity at a grassroots level.”

 


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DG NITDA Reiterates Needs for Safe and Inclusive Digital Environment

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To forge strategic partnerships and collaboration for the advancement of Nigeria’s digital transformation Agenda, the Director General of the National Information Technology Development Agency (NITDA), Kashifu Inuwa has reiterated the need for a safe and inclusive online environment responsible for human and Artificial Intelligence (AI) practices in country.

Inuwa made the statement while playing host to a team from TikTok who visited Agency’s Corporate Headquarters in Abuja to seek alliance towards bolstering the country, which aligns with President Bola Ahmed Tinubu priority area of strengthening national security for peace and prosperity.

The DG stated that content moderation strategies will help in addressing online problems like hate speech, misinformation, and cyberbullying in relation to the protection of minors across the country.

“With the Code of practice for Interactive Computer Service Platforms/Internet Intermediaries in place, this has helped in ensuring digital safety in accordance with global best practice and content moderation to enhance security”, he said.

He further noted that “no organisation or institution can operate in silos, we need each other for the actualisation of our goals and objectives towards services delivery and for the advancement of the Nation.”

Highlighting some critical areas, Inuwa stated that leveraging on the platform will advance the country through Digital Literacy 4 All (DL4ALL), Capacity Building, knowledge sharing, trainings, and curbing misinformation, digital safety with the aim of creating a safer cyber space and empowering online environment for Nigerian users.

He added that the platform allows for creative expression through filters, stickers, and editing tools, entertainment and comedy are dominant themes, and informational videos on various topics are gaining traction which has become a launchpad for influencers and trends that can go viral.

Inuwa also explained that NITDA’s Strategic Roadmap and Action Plan 2.0 (SRAP 2024-2027) is structured around eight pillars which include; Fostering Digital Literacy and Cultivating Talents, Building a Robust Technology Research Ecosystem, Strengthening Policy Implementation and Legal Frameworks, Promoting Inclusive Access to Digital Infrastructure and Services, Enhancing Cybersecurity and Digital Trust, Nurturing an Innovative and Entrepreneurial Ecosystem, Forging Strategic Partnerships and Collaborations, and Cultivating a Vibrant organisational Culture with an Agile Workforce.

In her earlier remarks, the Head of Government Regulation and Public Policy TikTok Nigeria and West Africa, Mrs Tokunbo Ibrahim has revealed that NITDA is one of its biggest and critical stakeholders in Nigeria that has an outstanding strides and performance in advancing the digital economy sector.

Ibrahim commended NITDA for its various initiatives, programmes, and policies set in place and aligns with that of TikTok, providing the opportunity were Nigerians use the platform to market, sell and export their products and services as well as talents to the outside world and make a living out of it.
She pointed out that there are projects and programmes that TikTok platform has forge ties of collaboration with, like the Africa creator hub where they do campaigns for tech creator, support, empower, and educate them on how to create contents and explore other sections of the platform, changing their narrative and adding values to what they are doing.

Ibrahim also added that TikTok platform considers online safety as one of its critical areas to secure the cyber space by providing an avenue for users to thrive and be productive in their various activities.

TikTok is currently running African mall to push the narrative of Africa to the world and creators are being equipped with information that they can create contents for products and services in Nigeria, thus can be exported to other countries of the world attracting investments


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Dr. Adesina, AfDB Group President Calls for Media Transformation to Uplift Africa’s Global Narrative

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Dr Akinwumi Adesina, the President of the African Development Bank Group, delivered an impassioned plea for more balanced media coverage of Africa and its development, noting it was critical for changing false narratives.

Adesina said this on Thursday in a keynote speech to the All Africa’s Media summit in Nairobi, attended by nearly 300 participants from across the continent. He praised the crucial role the media plays in strengthening democracy and advancing inclusivity.

The Bank Group president said there were many positive developments in Africa yet the continent continues to suffer misrepresentations which undermine its economic progress and investment potential.

“Despite the significant progress within our continent, the prevailing media narrative often focuses on negative stereotypes, overlooking the substantial advancements and resilience Africa demonstrates,” he added.

Adesina said there was plenty of positive news to report about and highlighted the continent’s economic resilience regional and amid global challenges. He said that in 2023, Africa’s growth rate surpassed the global average, with 11 African nations ranked among the world’s fastest-growing economies.

Adesina referenced a 2021 Africa No Filter Report, which revealed significant adherence to outdated and negative clichés in media reports about Africa. “It’s time for change,” he declared. “We must reshape the narrative about Africa to reflect its true spirit and potential.”

He emphasised the critical nature of information and its ability to have a profound negative impact on development and investor perceptions even though an in-depth investigation by Moody’s Analytics had shown the continent was much less of a risk than many other continents.

“We must promote a balanced view that highlights both the challenges and the many successes of Africa. It’s about changing perceptions and showcasing Africa as a continent rich with opportunity and innovation.”

The Bank Group President also spoke about the challenges and transformations within the media sector, highlighting the impact of digital technology.

“The media landscape has dramatically shifted with the rise of the internet and mobile technology, leading to a proliferation of digital platforms,” Adesina declared.

“While this has democratised information, it has also complicated issues, the distinction between fact and fiction can become blurred.”

To counter unfair and unbalanced narratives, Adesina urged the creation of a powerful, globally respected African media and proposed strategic collaborations among regional financial institutions to support this cause, emphasising the need for media to act as a catalyst for development.

“We need to celebrate and promote the continent’s successes, turning the tide against the longstanding stereotypes that have clouded the global view of Africa… What you call yourself, is the name others will subscribe to you.”

“For as long as we continually denigrate ourselves and play into the hands of those who control the narrative about Africa, we will be stuck with a label that does not belong to us,” he concluded.

He highlighted the African Development Bank’s own successes which included maintaining a AAA credit rating and launching groundbreaking financial initiatives that have earned it respect as an innovative and successful multilateral development bank.

“We have proven that Africa can lead with innovation and strength in the global financial landscape,” the President remarked. “Yet, these achievements receive minimal attention compared to the persistent focus on Africa’s challenges.”

Adesina added that just one month ago, the Bank launched a landmark $750 million hybrid capital instrument, again with a Triple A rating, which was oversubscribed eight times. He described this as a huge “testament to the confidence and trust in Africa’s burgeoning financial capabilities.”

He pledged that the African Development Bank remained committed to supporting initiatives that would help the media present a more balanced and progressive portrayal of Africa and support its economic development.

In a discussion with Julie Gichuru of the Mastercard Foundation after his address, Adesina said Africa was blessed with energy sources, but millions remained without electricity. “This must change,” he said.

“We cannot industrialise in the dark, we cannot develop in the dark. Our children cannot be competitive in a world of darkness,” he concluded.


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