NIGERIAN households are expected to spend a significant portion of their earnings on food in the next six months due to rising inflation, according to a recent survey by the Central Bank of Nigeria (CBN).
This comes as the National Bureau of Statistics (NBS) recently reported an inflation rate of 33.40 per cent, with food inflation surpassing 40 per cent.
The CBN survey, conducted between July 22 and 26, 2024, with a 99.7 per cent response rate, sampled 1,665 households across Nigeria’s 36 states and the Federal Capital Territory.
The findings, published in the CBN’s Household Expectation Survey on its website, reveal that many Nigerians plan to reduce spending on non-essential items over the next three to six months.
However, they anticipate allocating 54.9 per cent of their income to food during this period.
The survey indicates that in the next six months, consumers expect to spend a significant share of their income on food and household items (54.9 points), education (35.4 points), transportation (30.2 points), electricity (20.0 points), and medical expenses (12.2 points).
Conversely, respondents do not plan to spend heavily on big-ticket items such as homes, cars, or household appliances.
Additionally, they do not intend to invest in assets like land or other investments, nor do they plan to save. This reflects the current financial strain on families, with many expecting to deplete their savings or incur debt.
Inflation Perception and Outlook
The survey shows that in July 2024, 83.7 per cent of respondents perceived the current level of inflation as high, with an index of -61.1 per cent.
Businesses were slightly less pessimistic, with an inflation perception index of -58.7 points, compared to households at -63.3 per cent. Large businesses had the highest perception of inflation, with an index of -70.8 per cent.
By income group, those earning N150,001-N200,000 believed inflation was too high, with an index of -66.4 per cent. Those earning above N200,000 had a slightly less negative outlook, with an index of -58.3 per cent.
The CBN survey also suggests that many Nigerian households expect the naira to continue depreciating over the next three months, though they anticipate some recovery in the next six months.
As of the end of August, the naira had fallen to N1,598 per US dollar and further dropped to N1,639 due to a shortage of dollars.
This decline follows initial gains earlier in the second quarter of the year, making the naira the world’s worst-performing currency after the Lebanese pound.
Despite this, respondents are optimistic that the CBN’s monetary policies will lead to a recovery of the naira at the start of 2025.
However, they also expect inflation, borrowing rates, and unemployment to continue rising due to ongoing macroeconomic pressures.
The survey revealed that 80.9 per cent of respondents believe the economy will weaken further if prices increase more rapidly than they currently are, while only 3.2 per cent believe it will strengthen.
Key factors influencing businesses’ perception of inflation include rising energy costs, which increased from 90.6 points in June to 91.8 per cent in July, making it the top contributor.
The consistently high exchange rate also slightly increased from 88.3 points in June to 88.8 in July, while transportation costs, at 88.5 per cent, were the third major driver of inflation during the review period.
