Rising inflation will severely impact Nigerian consumers’ purchasing power, Fitch Solutions warns
Real household spending in Nigeria would experience subdued growth in 2022 due to rising inflation.
According to a new report by Fitch Solutions, as seen by Business Insider Africa, household spending in Nigeria will grow by only 3.5% to $72.3 (N30.0 trillion) this year.
“We forecast real household spending to grow by 3.5% in 2022… The easing of Covid-19-related restrictions will boost consumer mobility and retail activity. However, we see rising inflation and an increase in violence in the southwest of the country (where most of the country’s formal retail takes place) as headwinds to private consumption growth over the coming quarters. Furthermore, soaring levels of food prices on the back of the Russia-Ukraine conflict and food protectionist policies will severely impact consumers, who spend almost half of their incomes on food and non-alcoholic drinks,” said part of the report.
Among the factors responsible for the headwinds is the continuous depreciation of the value of the naira and the rise in lending interest rates.
But more than that, the surge in food prices has also negatively impacted the purchasing power of many Nigerians. According to the report, rising consumer price inflation has been the biggest risk facing consumer spending in Nigeria this year.
Already, the inflationary environment has forced Nigerian consumers to shift focus from discretionary spending.
Recall that inflation accelerated to 20.6% in June 2022, up from 19.5% in May 2022. Interestingly, food accounts for nearly half of the household spending in Nigeria.
“For Nigerian consumers, the cost of food and non-alcoholic drinks is of significant importance, as spending accounts for almost 50% of total household spending. Nigeria’s food inflation climbed to 20.6% y-o-y in June 2022 (as of latest available data) due to increases in the price of bread and cereals, potatoes, yam and other tubers, fish, meat and oils and fats,” the report explained.
A recent report by Business Insider examined how the increase in food prices has affected regular Nigerians. The situation could get worse before the end of the year.
