Ani Ernest, a Delta-based customer relationship officer at a mobile technology firm, has not been able to save from his monthly salary of N60,000 in recent times.
According to Ernest, most of his basic expenses take more than half of his salary. “My feeding takes over 50 percent, transport cost takes 20 percent, bills for electricity, waste bin, and security takes 10 percent and 10 percent support for my unemployed younger ones,” Ernest said in an interview with BusinessDay.
He also added that other basic commodities like clothes, airtime and data take five percent each.
Edet Akpan, a young man in his early 30s, said his level of savings compared to 2015 has reduced.
“I am still saving but not as massive as pre-2015 levels because of the level of inflation, currency devaluation and the financial support I give to my family, friends and colleagues who have been adversely affected by the economic crisis,” Akpan said.
Ernest and Akpan’s experiences validate the recent World Bank’s Global Findex Database, which shows that savings has dropped to a 10-year low in Nigeria.
The percentage of the adult population (15 years and above) who saved at a financial institution reduced to 17.7 percent in 2021, the lowest in 10 years, from 23.6 percent in 2011, BusinessDay analysis of the database shows.
When compared with other sub-Saharan African countries, Nigeria’s 17.7 percent is lower than South Africa (37.2 percent), Namibia (33.7 percent), Mauritius (28.9 percent), Kenya (21.5 percent) and Ghana (21.1 percent).
Analysts, who were not surprised by the data, said the current socio-economic indicators such as elevated poverty levels, rising inflation, high unemployment, low incomes and weak purchasing power are affecting people’s ability to save.
Inflation and unemployment levels have worsened, which has increased the country’s misery index, said Abiodun Keripe, managing director at Afrinvest Consulting Limited.
“So, clearly, these would affect the rate at which people would want to save, regardless of whatever class or age bracket they are. We will only see an improvement when there is a reversal of these indicators,” Keripe said.
The country’s inflation rate surged to a five-year high by 18.60 percent in June 2022 from 17.71 in the previous month, according to the National Bureau of Statistics. The high inflation rate already puts it among the highest in the world.
Unemployment is at an all-time high, rising to 33.3 percent in 2020. A 2021 Hanke’s Misery Index ranked Nigeria as the world’s 11th most miserable country out of 156 countries.
While the rising cost of living has affected peoples’ ability to save, Damilola Adewale, a Lagos-based economic analyst, said the decline in savings could also be a result of the growing investment culture in the minds of people.
“We’ve been seeing a lot of enlightenment on how money can be better invested for good returns that are even more attractive than bank deposit rates,” Adewale said.
One of such investments is cryptocurrency, which has gained traction over the past three years due to the depreciation of the naira and inflation. The 2021 Global Crypto Adoption report ranked the country among the top 10 countries that are taking the dive into cryptocurrency or seeing existing adoption increase.
“In emerging markets including Nigeria, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions,” the report said.
Savings are an important source of economic growth. Countries with higher rates of savings have had faster economic growth compared with those with lower savings rates.
A financial analyst who only wants to be known as Tony said that if people are not saving for the future, they are in poverty because the money that they save gives them the ability to make investments.
“Economic growth will be subdued in the near future because domestic investments will be low. It is what drives the economy,” he said.