FBNQuest, one of the leading merchant banks, has estimated average Nigerians spending capacity at $50 per month. In its recent analysis on the economy, FBNQuest is of the view that inflationary pressure has contributed to the subdued spending, say food inflation has remained high.
Analysts said that although Nigeria’s economy has posted growth in the past five quarters, household wallets have not necessarily been re-built and so purchasing power remains low. In 2018, gross domestic products (GDP) per capita was US$1,930. However, this could be misleading given the skewed wealth distribution in the country.
“The average Nigerians spending capacity is US$50 per month. Inflationary pressure has also contributed to subdue spending. Headline inflation has remained at double-digits since February 2016. Meanwhile, salaries and wages have not grown in inflation-adjusted terms”.
Based on data from the National Bureau of Statistics (NBS), food inflation rate has been considerably high since mid-2016 when it hits 20 percent year on year. Its latest reading, for the month of February, shows year on year growth of 13.47 percent. Although there has been a slowdown in the rate, this has not been reflected across prices of food products in markets.
According to the analysts note, it says as for imported food prices, there was a spike to 20.0 percent year on year in June 2016 which was mainly due to the foreign exchange pass-through effect on the back of the oil-price slide in 2014. Since then, imported food price inflation has slowed to 15.6 percent year on year. The CBN’s FX reforms have assisted with the slowdown.
The transport segment, which accounts for 6.5 percent of the total inflation basket, shows an inflationary price increase of 0.7 percent month on month in February 2019, unchanged from the previous month, and 9.6 percent year on year compared with 9.8 percent recorded in January.
“Transportation costs feed into spending patterns for most Nigerians”, FBNQuest reckons.
The firm added that for education and health, inflationary price increases were 9.7 percent year on year and 9.6 percent year on year respectively in February. The increases in these sectors have been mirrored in school fees hike in some private schools as well as increased cost of medical services.
To an extent, the recently adjusted national minimum wage for the public sector should help rebuild household pockets and boost spending. It is likely that this could result in an upward trend for headline inflation. For some companies within the private sector, a relatively stable business environment should support inflation-adjusted salaries.
