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

A new Central Bank of Nigeria (CBN) survey shows that consumers’ overall outlook in the second quarter of 2016 stayed downbeat amid worsening economic conditions that 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,” the CBN survey read.

A breakdown shows that majority of consumers nationwide expect to spend substantial amount 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 amount of their income on large ticket items such as purchases of house, car/motor vehicle and investment.

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

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

Most of the households are also not confident that unemployment will reduce in the next 12 months. Hence, 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 expected upward movement in prices are house rent, electricity, education, food, medical care and transportation.

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