Nigerians Cut Back on Spending Amid Economic Uncertainty

Nigerians are facing increasing economic challenges, leading to a decline in consumer spending and a growing sense of hopelessness about the economy.

The tough economic conditions, marked by weakened purchasing power, have resulted in a notable decrease in electronic payment transactions. Despite the Central Bank of Nigeria’s (CBN) efforts to promote a cashless economy, the value of electronic transactions fell month-on-month (MoM) by 5.7% in June, the second decline in three months.

According to data from the Nigeria Inter-Bank Settlement System (NIBSS), the total value of e-payment transactions dropped to N87.45 trillion in June 2024 from N92.8 trillion in May. This decline was primarily driven by a 9.0% MoM decrease in NIBSS Instant Payment (NIP) transactions and a 27% fall in cheque transactions.

However, some areas showed growth. Point of Sale (PoS) transactions increased by 7.4% MoM to N930.76 billion, and Nigeria Electronic Funds Transfer (NEFT) transactions rose by 62% MoM to N6.7 trillion.

This downturn in e-payment transactions reflects broader economic struggles. Analysts, including members of the CBN’s Monetary Policy Committee (MPC), attribute the decline to reduced consumer spending, which also hinders firms from expanding production.

Mr. Bismarck Rewane, Managing Director/Chief Executive of Financial Derivatives Company, noted, “The decline was due to lower consumer spending as inflation continues to bite.”

Data from the National Bureau of Statistics (NBS) showed that the cost of a healthy diet rose by 32% to N1,041 per adult per day in May 2024 from N786 in December 2023. With incomes failing to keep pace with rising prices, many Nigerians are cutting back on non-essential spending to meet basic food needs.

This economic strain is reflected in consumer pessimism. According to Mr. Bandele Amoo, a member of the MPC, consumers expressed a negative outlook on economic conditions in the first and second quarters of 2024 due to worsening family situations and declining purchasing power.

The impact extends to businesses as well. The Stanbic IBTC Purchasing Managers Index (PMI) report showed that private sector firms experienced the lowest expansion in output in seven months due to subdued demand and rising prices.

Commenting on the PMI report, Muyiwa Oni, Head of Equity Research at Stanbic IBTC Bank, said, “The Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 index points in June from 52.1 index points in May due to moderation in domestic demand amid the intensification of price pressures.”

Overall, the economic challenges are creating a tough environment for both consumers and businesses, with little sign of immediate relief.