Inflation in Africa’s biggest economy, which has surged to the highest in 17 years, has forced cash-strapped consumers to adapt coping mechanisms to deal with the inflationary pressures.
According to a consumer pulse survey conducted in October by Pierrine Consulting, a specialist tech-first marketing research and strategy firm, consumers currently run on budgets, practise reducing expenses, and have savings to sustain high living costs.
“When asked how they manage their disposable income, living on a budget, reducing the number of goods purchased, avoiding unplanned spending, and reducing expenses were top of the list of things they do to manage their incomes,” the report said.
Other methods are buying in bulk, buying on credit, joining food clubs (cow-sharing, tomato basket sharing, bag sharing, etc.), and buying a cheaper brand.
Nigeria’s headline inflation rate accelerated for the ninth consecutive month to 21.09 percent in October 2022, the highest in 17 years, from 15.60 percent in January, according to the National Bureau of Statistics (NBS).
Food inflation, which is also at the highest in 17 years, increased for the eighth consecutive month to 23.72 percent in October from 17.11 percent in February.
The surge in inflation rate led to a 12 percent increase in household consumption expenditure to N27.3 trillion in the first half of 2022, the highest in five years, from N24.3 trillion in the corresponding period of 2021, according to NBS.
The rising inflationary pressures also increased the cost of doing business, which made salaries and wages grow in the second quarter of 2022 at the slowest pace since Q3 2020, when the country plunged into the COVID-19-induced recession.
According to the NBS, salary growth fell to 3.93 percent in Q2 from 6.48 percent in the previous quarter. This has squeezed consumer purchasing power, making them poorer. The multidimensional poverty index report released last month shows that 133 million people are poor in health, education and two other dimensions.
“Rising inflation in recent periods has been having a negative effect on the prices of goods and services; it is having a spillover effect on people and what is seriously affected are people’s savings,” said Moses Ojo, a Lagos-based economic analyst.
Ojo said a significant proportion of people’s earnings are going to utilities and little or nothing goes to savings.
Emmanuel Chigozie, a 22-year-old undergraduate at the Federal University of Technology, Owerri, told BusinessDay that everything has changed in the market and that food is now costly to prepare.
“I used to budget a specific amount for feeding but I don’t do that again because you can’t determine what the market brings next,” he said.
Omoyele Sowore, presidential candidate for African Action Congress party, recently asked Nigerians on Twitter how much it cost them to live in the country monthly.
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Most of the responses show that feeding takes a chunk of many Nigerians’ disposable incomes (N30,000-N75,000 monthly), followed by transport (N15,000-N30,000) and accommodation (N30,000-N75,000).
Analysts say price growth, which is shrinking demand for goods and services, contributed to the first contraction recorded in the food, beverage and tobacco subsector since the second quarter of 2020.
Data from the NBS show that the subsector contracted by 4.05 percent, compared to a growth of 5.11 percent in the previous quarter.
“We are seeing some sort of reshuffling in the way consumers do their budget, and this caused a contraction in the subsector,” said Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc.
He said even non-discretionary items that consumers have no choice but to buy are being demanded in lower quantities. “We are beginning to see the impact of rising prices in that sector.”
Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise, said the fact that it is the first contraction since Q2 2020 means the subsector is facing serious shocks.
“This is bad because it is the biggest segment in terms of contribution to GDP among the manufacturing sector,” he said. “The contraction is a reflection of a major setback for the Nigerian manufacturing sector, which calls for an emergency response by the government.”
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