Consumers’ finance amid rising inflation

The steady stream of shocks over the past few years have been far from easy on consumers’ finances, EHIME ALEX examines latest trends

As the Coronavirus Disease heat appears to be abating, inflation is rising and impacting low income earners. In February 2022, the number of Americans concerned about the amount of money they have saved rose to 59 per cent, according to a report by Deloitte’s team of economists. They stated the Americans are increasingly worried, as inflation perceptions continue to rise.

“As safety concerns finally ease, financial concerns rise,” the experts stated, noting that despite rising retail sales in January, consumer discretionary spending intent as a share of wallet has been edging lower over the past six months — coinciding with rising inflation concerns.

“Since September 2021, discretionary spending intentions have weakened the most for medium-income earners,” they added.

At the 5th edition of Alpha Morgan Capital Quarterly Wealth and Economic review on Tuesday, the Managing Director/Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, said whatever is happening in the U.S. should be a concern for the Nigerian economy.

Rewane said, while it seems obvious that political decisions are weighing on economic decisions, Nigeria’s “inflation will remain high amid rising global inflation, lingering currency pressures and election spending.”

Across the globe, the current outlook for lower earners ranges from fairly positive to outright bleak, even as the current turmoil in global food markets due to an expected shortage of Russia-Ukraine grain and fertiliser, likewise amplified concern on rising commodity prices. As expected, demand has continued to exceed supply, thereby putting pressure on prices.

Together, Russia and Ukraine account for about six per cent of global grain production and about 16 per cent of global grain exports.


Increasing food prices

According to the latest report by the National Bureau of Statistics on ‘Selected Food Price Watch’ index, the average price of foodstuff – beans, bread, tomato, eggs, yam and groundnut oil – rose year-on-year in February 2022 relative to the corresponding month in 2021 and preceding month.

For instance, the average price of one kilogramme of beans (white, black eye, sold loose) rose YoY by 50.1 per cent from N331.48 in February 2021 to N497.54 in February 2022 and month-on-month by 3.34 per cent from N481.47 in January 2021.

At the heat of the pandemic in 2020, Nigeria had gone into a recession after it reported two consecutive negative quarterly growths in Q2 and Q3. 


Inflation pressure

Also, data by the NBS showed the country’s inflationary pressure increased to 15.7 per cent for the month of February 2022 from 15.6 per cent in January. According to the statistics office, the highest increases were recorded in prices of gas, liquid fuel, wine, tobacco, spirit, narcotics, solid fuels, among others.

Inflation rate has further threatened the 13 per cent inflation target for 2022 set by the government. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had said during her presentation of this year’s approved budget, “Inflation is projected to be double-digit in the medium-term given structural issues impacting the cost of doing business, including high food distribution cost. However, the current steady decline is expected to be sustained, seeing the inflation rate drop to 13 per cent in 2022 and 10 per cent by 2024.”


Household consumption vs disposable income

While the National Disposable Income grew by -2.25 per cent in Q1 2021 and -5.35 per cent in Q2, according to NBS, the Household Consumption Expenditure, in Q1 and Q2, grew by 43.72 per cent and 48.16 per cent YoY in real terms, even as its yearly growth rate stood at 1.56 per cent compared to -1.06 per cent in 2019.


Economic reality

From an economic perspective, anywhere in the world, savings remains one of the most important types of household economic activities and an adequate supply of domestic and/or household savings remains a core national policy objective.

Mainly due to its direct impact on the growth process as well as its role as domestic investment stimulant, higher savings rate is crucial for the long term investment process, which in turn manifests into industrialisation that breeds employment opportunities and economic development.

Given the increasing integration of international financing, for instance, it is high domestic savings that can ensure macroeconomic stability internally. The postulation of the positive influence of savings on investment and subsequent growth and development, according to economists, is an indication that savings matters for growth and development anywhere in the world.

Ehime Alex
Ehime Alex
Ehime Alex reports the Capital Market, Energy, and ICT. He is a skilled webmaster and digital media enthusiast.

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