CBN Projects Nigerians Will Allocate 54.9% of Income to Food Over the Next Six Months

Inflation to Dominate Household Budgets in Nigeria Over the Next Six Months, CBN Survey Reveals

A recent survey by the Central Bank of Nigeria (CBN) indicates that Nigerian households will allocate the largest portion of their earnings to food expenditures in the upcoming six months. The survey highlights that the inflation rate has surged to 33.40%, with food inflation surpassing 40%.

Conducted between July 22 and July 26, 2024, the CBN survey achieved a 99.7% response rate from a sample of 1,665 households across Nigeria’s 36 states and the Federal Capital Territory. The findings, published in the Household Expectation Survey on the CBN’s website, reveal that many Nigerians plan to reduce spending on non-essential items over the next three to six months.

Households are expected to spend 54.9% of their income on food items during this period. The survey also outlines projected spending priorities, including education (35.4%), transportation (30.2%), electricity (20.0%), and medical expenses (12.2%). Conversely, significant expenditures on major purchases like homes, cars, or appliances are not anticipated.

Respondents also indicate no plans for investment in real estate or other assets, nor do they intend to save their incomes. The survey suggests that many Nigerians are either depleting savings or accruing debt.

Inflation Perception and Outlook

In July 2024, 83.7% of respondents viewed the current inflation rate as high, with an index rating of -61.1%. Businesses had a slightly less negative perception of inflation compared to households, with a -58.7% index. Large businesses, however, reported a more severe index of -70.8%.

Income group analysis shows that those earning ₦150,001-₦200,000 perceived inflation as particularly high, with an index of -66.4%. The higher income group, earning above ₦200,000, had a slightly less negative index of -58.3%, reflecting a marginally more optimistic outlook.

Naira’s Projected Strengthening

The CBN survey also reveals expectations that the naira will continue to weaken in the short term but is anticipated to strengthen by early 2025. The naira recently fell to ₦1,598 per US dollar, with a further decline to ₦1,639 due to a shortage of dollars. Despite initial gains earlier in the year, the naira has struggled, becoming one of the world’s weakest currencies.

Respondents are hopeful that the CBN’s monetary policies will lead to a recovery for the naira at the start of the new year.

Rising Inflation, Borrowing Rates, and Unemployment Expected

The survey indicates that Nigerians expect continued increases in inflation, borrowing rates, and unemployment due to ongoing macroeconomic challenges. A significant 80.9% of respondents believe the economy will weaken if price increases accelerate, while only 3.2% foresee an improvement.

Key inflation drivers identified include rising energy costs, which increased from 90.6% in June to 91.8% in July, a consistently high exchange rate with a slight rise from 88.3% to 88.8%, and transportation costs, which contributed 88.5% to inflation during the review period.