Nigerians Brace for Tough Economic Months, Turn to Borrowing and Savings Amid Pessimism
By understanding how people anticipate changes in the cost of goods and services, monetary policy can be better managed to stabilize the economy and promote growth.
As Nigeria’s economic challenges deepen, many citizens are preparing for difficult months ahead, with plans to rely heavily on borrowing and depleting their savings to meet financial obligations. This trend is highlighted in the Central Bank of Nigeria’s (CBN) July 2024 Household Expectations Survey, which reveals a growing sense of pessimism among Nigerian consumers about the country’s economic outlook.
The survey, which covered 1,665 households across Nigeria, reveals a sharp decline in consumer confidence, with the confidence index for the next three months standing at -9.1 points. This negative figure underscores a significant level of anxiety among Nigerians who foresee a further deterioration in economic conditions and their personal financial situations.
Growing Pessimism in Nigeria’s Economic Future
The CBN’s survey indicates that many Nigerians are preparing to either draw down their savings or incur more debt to manage their financial needs over the coming months. The report states: “At -9.1 points, consumers’ overall confidence was pessimistic for the next three months. This outlook is attributed to declining economic conditions and worsening family financial situations, as consumers anticipate drawing down on savings or taking on debt. However, there is an expectation of improvement in total family income, as the index stood at 1.6 points.”
Consumer Sentiment for July and August
In July 2024, Nigerian consumers expressed a deeply pessimistic outlook, as captured by the Consumer Confidence Index, which fell to -41.7 points. This stark figure indicates widespread concern over the state of the economy, with many households anticipating the need to rely on savings or credit to manage living expenses.
Looking ahead to August 2024, the sentiment remains negative, although there is a slight improvement. The confidence index is projected to rise to -21.8 points, suggesting that while consumers remain pessimistic about the future, there is a marginally less negative outlook compared to July. This slight increase hints that some Nigerians are holding onto hopes of a modest stabilization or improvement in their financial circumstances.
Signs of Cautious Optimism for Early 2025
Despite the overall pessimistic outlook, there is a glimmer of hope as Nigerian consumers express a slightly optimistic perspective for the next six months. The index for January 2025 is projected at 2.7 points, driven by expectations of improvements in both the economy and family incomes by early 2025. The survey notes: “Consumers were optimistic in their outlook for January 2025, as the index stood at 2.7 points. This positive outlook is attributed to anticipated improvements in the economy and expectations of better family income in the next six months.”
Key Economic Concerns Among Nigerians
The CBN survey highlights several major concerns affecting Nigerian consumers:
- Rising Costs of Basic Commodities and Services: Many Nigerians expect the cost of essentials such as food, transportation, and medical expenses to continue rising in the coming months, exacerbating the already high cost of living.
- Hesitancy in Making Significant Purchases: A majority of respondents believe that now is not the right time to make substantial purchases, such as consumer durables, motor vehicles, or real estate.
- Expectations of Higher Interest Rates: A significant portion of the surveyed households expects borrowing rates to increase soon, further complicating access to credit for many Nigerians.
The Growing Reliance on Credit to Manage Finances
Nairametrics recently reported that the rising cost of living has pushed Nigerians to borrow approximately N4.82 trillion from banks between January and March 2024. Consumer credit outstanding in Nigeria surged by 268.9% to N8.24 trillion by the end of March 2024, up from N3.42 trillion in December 2023. This sharp increase reflects the severe financial strain on Nigerians, driven by escalating inflation and a challenging economic environment.
The surge in consumer credit has been primarily driven by significant rises in both personal and retail loans. Personal loans constitute the largest portion of consumer credit, increasing by 270.4% to N7.52 trillion by the end of March 2024. Similarly, retail loans saw a notable rise of 253.4%, reaching N721.13 billion. This growth highlights a growing dependence on credit to manage personal finances, with personal loans accounting for a dominant 91.2% share of total consumer credit.
What Lies Ahead for Nigerian Consumers?
With many Nigerians bracing for challenging months ahead, relying on savings and borrowing to weather the economic storm, the coming months will be critical in determining the country’s economic stability. The cautious optimism for early 2025 reflects a hope for better days, but for now, Nigerians continue to navigate an uncertain economic landscape marked by inflation, high living costs, and tightening financial conditions.
