The rising cost of living in Nigeria is one factor affecting the quality of life of its citizens. The cost of living in Nigeria has been steadily increasing, marked by a significant rise in the prices of food and services in recent years.
The cost of living can differ based on several factors, such as location, lifestyle, and spending habits. Prices of goods and services may vary significantly across different regions and cities in Nigeria. Generally, urban areas have higher prices than rural areas, and the southern cities have higher prices than those in the north. The most expensive cities in Nigeria include Lagos, Port Harcourt, Abuja, and Ibadan. However, the cheapest cities are Kano, Maiduguri, Sokoto, and Bauchi due to their proximity to stable foods such as grains, rice, and beans.
Housing and transportation are among the significant expenses for most Nigerians. The cost of renting or buying a house or apartment depends on the property's size, location, and quality. The cost of transportation depends on the mode of travel, distance, and frequency. Before the subsidy's removal, the transportation cost from Lagos to Port Harcourt by road was ₦10,500, now costing ₦21,500. Food and groceries are essential for every household; their cost depends on product type, quality, and quantity.
According to Numbeo (an online tracker of cost of living and quality of life in countries across the globe), the estimated monthly cost for a family of four without rent in Lagos is ₦1.24m, while for a single person, it is estimated as ₦343,092, less than Kano. But the estimated monthly cost for an average family of four in Nigeria without rent is roughly around ₦150,000. According to Numbeo, furnished accommodation in an expensive area costs an average of ₦451,523 per month, while in some cheaper places, it is ₦48,000 per month. Numbeo noted that the average price of a basic lunchtime menu in the business district, including a drink, is ₦2,119, while a combo meal in a fast-food restaurant costs ₦3,174.
Nigerian Naira Notes
Read also: Exchange Rate: 300 USD to NGN
Factors Affecting Cost of Living
Several factors, including inflation, exchange rates, government policies, and the cost of production, can influence the cost of living in Nigeria, significantly impacting the overall standard of living for individuals and families. Some of the key factors that affect the cost of living in Nigeria are highlighted below:
Africa’s biggest economy’s inflation rate is 26.72%, the country’s minimum wage is relatively low at US$39.3, excluding the 6 months provisional wage increase. High inflation rates have eroded the purchasing power of the local currency, leading to an increase in the general price level of goods and services. The minimum wage of $85 may not be sufficient for many individuals and families to meet their basic needs, especially considering the high inflation rate. This has resulted in a decreased standard of living for those who rely on minimum wage income. The high CPI has reduced consumers’ purchasing power, meaning they would have to spend more money to purchase the same goods and services as before, ultimately reducing their disposable income.
Analysts’ expectations surround a further increase in inflation. This, without doubt, affects ordinary citizens’ living costs and makes it more challenging for individuals and families to afford necessities.
Nigeria’s slow productivity has kept household income sources relatively static. The household income sources have slightly increased beyond the agricultural, non-agricultural (trading), wages/salary, and non-labour (rental income and remittances) quoted by General Household Survey data gathered in 2010. The recent technological advancement has stimulated the rapid development of technology and entertainment sectors, which the young population has harnessed to expand their income. Professions like brand influencing, content creation, technology experts, software developers, fintech and many others have sprung up from the sector, thereby improving household income for specific demographics (youth) while the older generations grapple with limited income sources. Nevertheless, the rising inflation induced by the twin subsidy removal has doubled household expenditure, eroding a significant portion of their disposable income.
The standard of living and household welfare have deteriorated significantly; for instance, an individual earning the minimum wage (N30,000), excluding any additional income, will have a monthly deficit of above N30,000 based on the double basic amenities.
Read also: Infinix Smart 5 Price & Specs
This reveals that an individual cannot survive on the current minimum wage, as he/she requires an estimated additional income of above N20,000 to cover the recurrent expenditure without any excess for savings/ investment and individual development. Individuals have opted for loans from banks or family members to bridge the income gap, which can result in higher non-performing loans for banks as employees continuously remain insufficient.
Recently, the Federal Government announced a supplementary minimum wage raise of N35,000, bringing the total minimum wage to N65,000. The temporary minimum wage adjustment makes civil servants slightly better off with little or no deficit based on the assumption that product/service price remains constant, and individual maintains similar expenditure. However, analysts doubt the possibility of a constant general price level or moderation, given the key drivers of inflation (naira depreciation and logistics costs). Hence, individual expenditure would likely continue to outweigh income and eventually revert to the initial wide income shortage post-6-month supplementary raise.
The analysis above suggests the supplementary wage raise is not necessarily a lasting solution to the rising income shortage and high poverty rate. The increasing income shortage will worsen the country’s multidimensional poverty rate, which rose to 63% or 133 million people as of 2022.
Household Budget Review: Income vs. Expenses
The tables below illustrate the income and expenses performance, as well as the impact of the minimum wage on an individual's financial situation.
| Category | Details |
|---|---|
| Income Sources | Agricultural, non-agricultural (trading), wages/salary, non-labour (rental income and remittances), technology and entertainment sectors. |
| Impact of Inflation | Rising inflation induced by subsidy removal has doubled household expenditure, eroding disposable income. |
| Minimum Wage Deficit | An individual earning the minimum wage (N30,000) has a monthly deficit of above N30,000 based on basic amenities. |
| Item | Description |
|---|---|
| Minimum Wage | Individual cannot survive on the current minimum wage |
| Required Additional Income | Requires an estimated additional income of above N20,000 to cover recurrent expenditure |
| Coping Mechanisms | Individuals opt for loans from banks or family members to bridge the income gap |
| Factor | Analysis |
|---|---|
| Supplementary Wage Raise | Not a lasting solution to the rising income shortage and high poverty rate. |
| Poverty Rate | Increasing income shortage will worsen the country’s multidimensional poverty rate, which rose to 63% or 133 million people as of 2022. |
Nigeria And The Rising Cost Of Living | WAYS
Government Interventions to Support Households in Nigeria
Every human needs a range of necessities for daily life, such as food, water, clothing, shelter, education, and health care. The economic condition of lacking these essential goods and services to meet the basic needs of life has become the major reason why nations embark on policies and programs that would engender development and ultimately reduce poverty to its barest minimum. While poverty is universal, it is severe in developing countries. Previous governments in Nigeria made efforts by initiating policies and programmes that will at least reduce the poverty level from all ramifications.
Read also: Comparing Africa and North America
Poverty Rate in Nigeria
Poverty mitigation was seen as a method through which the administration could reproduce the economy and modify self-regard in the lion's share of Nigerians. Among the poverty-reducing projects were the starting of the Universal Basic Education (UBE) Program, the Poverty Alleviation Program (PAP) and the National Poverty Eradication Program (NAPEP).
Government interventions to support households in Nigeria from 2000 to 2023 have displayed diverse approaches and outcomes. The traders' money scheme, initiated in October 2018, aimed to provide interest-free micro-credit loans of N10,000 to small-scale traders. While it provided initial financial support, the relatively small loan raised concerns about long-term sustainability. Lessons learned emphasize the importance of scalability and the need to address the financial needs of small-scale entrepreneurs with sustainable loan terms and clear repayment mechanisms.
Another initiative is the anchor borrowers' scheme, launched in November 2015, which sought to provide loans, both in kind and cash, to smallholder farmers to boost agricultural productivity. The scheme's effectiveness varied based on region and sector, highlighting the importance of region-specific strategies for agricultural development. Lessons learned include the necessity of comprehensive assessments of local farming conditions, sufficient access to resources, and flexibility in program design to address regional disparities.
Stigmatization emerged as a prevalent issue throughout the COVID-19 Pandemic. The creation and execution of the National Health Sector COVID-19 Pandemic Response Action Plan (NAHCPRAP) from 2020 to 2021 was pivotal in tackling the pandemic’s complex challenges.
Popular articles:
tags: #Nigeria
