According to the NBS, families are spending more money as inflation remains high

There are signs that the economy’s persistent inflationary pressures have forced a reversal of the trend in household consumption expenditure.

According to the National Bureau of Statistics, NBS, the data that had been declining since the second quarter of 2022, Q2’22, turned to an upswing in 2023.

The NBS, yesterday said that real household c o n s u m p t i o n expenditure grew yearon- year (YoY) by 3.3 per cent in the second quarter of 2023, Q2’23.

The last growth was recorded in Q1’22 when it rose 8.66 per cent. In second quarter of 2022, Q2’22, household c o n s u m p t i o n expenditure went negative, down to -5.21 per cent and declined further to -5.83 per cent in the third Q3’22.

In fourth quarter 2022, Q4’22, household c o n s u m p t i o n expenditure fell massively to -12.47 percent and it further plunged by -24.95 per cent in the first quarter of 2023, Q1’23.

In its report entitled, ‘Nigerian Gross Domestic Product (Expenditure and Income Approach) Report for Q1 and Q2 2023’, the NBS stated:”Household final consumption, in real terms, grew by -24.95 percent and 3.30 per cent in Q1 and Q2 of 2023 respectively, on a year-on-year basis.

“The observed trend since 2020 indicates that real household c o n s u m p t i o n expenditure declined in Q1 and Q2 of 2020, accounting for negative growth rates informed by the pandemic.

“However, positive growth rates were recorded since Q3’20 as recovery from the pandemic was witnessed, while growth became negative from Q2’22 to Q1’23 occasioned by rising prices, the cash crunch witnessed earlier this year as well as the current challenging economic conditions.

“Furthermore, growth in Q2’23 stood positive recorded at 3.3 per cent, a departure from the negative trend recorded in the previous quarter.

“On a quarter-on-quarter basis, real household consumption expenditure decreased by 20.29 per cent in Q1’23 and rose by 11.68 per cent in Q2 of 2023. “ H o u s e h o l d consumption accounted for 57.18 per cent of real GDP at market prices in Q1′ 23, and 64.05 percent in Q2’23”.

“This could be detrimental to capital formation and ultimately economic growth in the medium term if inflation is not addressed quickly.”

Analysts comment

Against the backdrop of the trend reversal, some analysts have attributed the development to inflation, which forced households to devote more funds to basic necessities such as food while savings, investments and capital expenditures were suspended.

It’s inflation induced —Parthian Partners

Commenting on the consumption figures, Marvellous Adiele, Senior Associate at Parthian Partners, a Lagos-based investment finance company, said: “The growth in household expenditure despite the current economic situation could be majorly driven by inflation.

The rising prices of goods and services mean increased spending for consumers as they strive to cover their living expenses.

“Also, the persistent rise in inflation (27.33 pe rcent as at Oct 2023) means that consumers’ purchasing power continues to decline, which could in turn affect their standard of living.”

Families shifted towards recurrent rather than savings, investment —Ex-CIS boss

Reacting also, Olatunde Amolegbe, immediate past president of the Chartered Institute of Stockbrokers,

CIS, said: “The obvious reason is galloping inflation particularly as related to food and other household items. Families are now having to dedicate more of their income towards recurrent expenditure rather than towards savings
and investments.

It is induced by base effect – Wyoming Capital

Also reacting, Tajudeen Olayinka, CEO, Wyoming Capital and Partners said: “The fact that it suffered a decline of -5.21 per cent in Q2 2022 and had an improvement of 3.3 per cent in Q2 2023 tells the story of a modest recovery, still slightly in the negative territory but turned out positive due to base effect. It is a good development, though.

“It is nothing spectacular. It means more efforts are needed to put household consumption in positive territory, and by extension, economic growth.”

Fiscal stimulus measures might have played a substantial role —ID Africa

On his part, Clifford, Egbomeade, Public Relations & Communications Adviser at ID Africa, said: “The second quarter of 2023 witnessed a notable turnaround in household consumption expenditure, marking a departure from the persistently negative trends observed since the second quarter of 2022.

“Despite an increasingly adverse economic landscape, the 3.3 per cent year-on-year growth in real household consumption expenditure signifies a nuanced interplay of various factors.

“One pivotal driver contributing to this shift could be the strategic interventions by policy-makers.

Government initiatives, such as fiscal stimulus measures, might have played a substantial role.

“Concurrently, the ongoing adjustments of monetary policies, potentially involving interest rates, might have incentivized borrowing, thereby empowering households to engage in increased spending activities.

“Another influential factor could be the improvement in consumer sentiment. Positive changes in sentiment, stemming from expectations of a prospective economic recovery, could have significantly influenced the upturn in spending behaviour.

“Heightened optimism regarding job security, income stability, or overall economic revival might have emboldened consumers to allocate more towards consumption, even amidst a challenging economic backdrop.

“Furthermore, the phenomenon of pent-up demand likely contributed to this surge in household expenditure. In periods of economic downturn, consumers often defer significant purchases. As economic conditions stabilise, there is often a release of this deferred demand, leading to a surge in spending across various sectors.

This release might have contributed substantially to the observed growth in household consumption expenditure.

“Additionally, specific industry dynamics could have played a role. Certain sectors experiencing recovery or growth, such as technology and healthcare, might have induced increased consumer spending within these areas.

Likewise, improvements in supply chain efficiencies could have enhanced the availability of goods, prompting consumers to spend more confidently.”

GDP by expenditure

Meanwhile, the bureau also noted that in Q1’23, the GDP by expenditure grew in real terms by 2.31 per cent YoY and recorded 2.51 percent in Q2’23.

It added:” This shows a sustained positive trajectory since Q4’20.

“However, this was a reduction of 0.8 per cent in growth of Q1’23 and a fall of 1.03 percent in Q2’23 compared to the corresponding period of 2022.”

According to NBS, the GDP can be derived as the value ofall goods and services available for final uses and export while the expenditure approach measures the final uses of the produced output as the sum of final consumption, Gross Capital Formation, and exports less imports, which are considered in turn in the report.

Nigeria’s economy drifting under APC’s watch —LP

Meanwhile, reacting to the NBS report, the Labour Party, LP, said rising food prices and the general downturn of the Nigerian economy were direct consequences of the absence of proper planning and the lack of empathy by the All Progressives Congress, APC-led Federal Government.

National Publicity Secretary of the party, Obiora Ifoh, spoke in response to the latest NBS report which put the inflation rate at 25.8 per cent as at August 2023, 26.72 in September, 2023 representing 17 and 18 yearhighs respectively, said it was proof of the Fedederal G o v e r n m e n t ’ s directionlessness.

Ifoh said: “Like the NBS report rightly captured, our economic foundamentals have been so weakened that our inflation rate keeps soaring, leading to sluggish economic growth thus forcing millions of Nigerians into poverty.

“It is sad that most Nigerians now spend over 80 per cent of their income onfood alone, and we are not talking about energy cost and out of pocket expenses on healthcare.

“This government has not made pretenses about its intentions with regards to funding the lavish lifestyles of those in elective office to the detriment of the suffering people of Nigeria.

“How do you explain the N2.1 trillion Supplementarybudget signed into law by President Bola Tinubu? How much was voted for healthcare, roads and infrastructure that will benefit ordinary Nigerians?

“What you see is billions to be spent on the renovation of accommodation for elected government officials and the purchase of vehicles.

“Now, more than ever before, the cost of food has risen beyond what ordinary Nigerians can afford. A bag of 50kg rice is today over N50,000, up from N8,000 only a few years ago.

“What it simply means is that the monthly wage of acivil servant cannot buy a bag of rice. Even the cost of garri, yam, potatoes, maize and other staple foods have skyrocketed beyond the reach of most Nigerian households with no hope in sight.

“This government lacks basic empathy for the suffering of Nigerians because while Nigerians are crying out in anguish over the rising cost of living officials of this administration are busy wasting scarce public funds.

“The renewed hope agenda it claims to be pursuing has since become renewed hopelessness.”

APC govt remains committed to tackling poverty

An APC leader, who did not want his name in print, said: I haven’t seen the full report and what you sent is just a few paragraphs.

By the time we see the entire report, we will look at it and decide what our response would be.

“However, our government remains committed to tackling poverty and uplifting Nigerians. All appointees have hit the ground running and major sectors of the economy are responding positively to the policies of government,” the leader said..

Nigerians getting poorer, hungry while FG borrows to fund luxuries — Atiku’s aide

Meanwhile, Special Assistant on Public Communication to former Vice President Atiku Abubakar, Mr.Phrank Shaibu, said the NBS report showed what most Nigerians already face.

Shaibu who spoke to Vanguard, in Abuja, said: “We are not suprised about the findings of the report which show that more Nigerians are being impoverished and that they are spending the little they have on feeding alone.

“It is simply a confirmation of what we have always told Nigerians about this government.

“Nigerians will recall, the last time the NBS released its report when inflation climbed to double digits as soon as APC came into office in 2015, we informed Nigerians that the situation can only get worse because the APC is not prepared for governance.

“If Nigerians can recall, the battle cry of this administration is that it will build on what the Muhammadu Buhari administration did.

What Nigerians didn’t hear was that the sufferings Nigerians were subjected to for eight years will be doubled.

“The number of Nigerians living in extreme poverty which stood at over 133 million, representing roughly 64 per cent of Nigeriansduring the Buhari regime, has risen under Tinubu.

“We invite Nigerians to note that when the PDP was in power, our economy was in robust health. inflation was within single digit, the exchange rate of the Naira to the Dollar was around N180 to $1 USD but today, the Naira is the worst performing currency in the world exchanging at over N1,000 to $1USD.

“A 50 kg bag of rice under successive PDP governments sold for no more than N8,000 per bag but now you’ll struggle to get the same bag for more than N50,000 at a time the national minimum wage stands at N30,000 per month.

“The reality on ground is that Nigerians have never had it so bad but Tinubu and his team are busy funding their luxurious lifestyles with huge budgets for renovation of official residences and the puchase of vehicles.

Little, if anything, was included in the Supplementary budget signed by the President for healthcare, building of schools and provision of infrastructure that will benefit Nigeria’s poor and vulnerable.”