Consumers cut back on spending as worsening economic condition bites on savings

A new Central Bank of Nigeria survey shows that consumers overall outlook in the second quarter of 2016 stayed downbeat amid worsening economic conditions which have adversely affected savings and forced a decline in net household income.

According to the survey which sampled 1,950 households, the pessimistic outlook on economic condition, family financial situation and family income cut across all income groups.

“On average, more respondents nationwide expect some increase in their expenditure on basic commodities and services in the next months. Consumers expect to spend substantial amounts of their income on education, medical care, investments, food and other household needs,” read a CBN statement.

A breakdown showed that majority of the consumers nationwide expect to spend substantial amounts of their income on food and other household needs, education savings, medical expenses and investments in the next 12 months. On the other hand, they do not plan to spend substantial amounts of their income on large ticket items such as purchases of house, car/motor vehicles and investment.

Furthermore, most consumers expect the prices of certain expenditure items to rise in the next quarter. The items include house rents, electricity, education, food, medical care, transportation, personal care, clothing and footwear and hotel and restaurant services. In that regard, they expect government and its regulatory agencies to take appropriate steps to dampen the impact of these inflationary expectations on the economy.

The survey also revealed that majority of consumers did not believe that the current quarter was ideal for the purchase of luxury items and big-ticket items like consumer durables, motor vehicles and houses etc.

Most of the households are also not confident that unemployment will reduce in the next 12 months. As such, consumers expect borrowing rates to rise and exchange rate to appreciate in the next 12 months.

It is also expected that the major drivers of an anticipated upward movement in prices are house rents, electricity, education, food, medical care and transportation.

Generally, consumers outlook for the next quarter and the next 12 months was positive, largely due to expectation of improved economic conditions in the country and an anticipated increase in the net household income, which could lead to increased savings to meet financial obligations.

FRANK ELEANYA