Hope for turnaround of the naira in 2025
In a recent survey by the Central Bank of Nigeria, Nigeria’s apex bank, it shows that the rising inflation rate will force Nigerian households to spend the largest share of their earnings on food in the next six months.
This is as the most recent report by the National Bureau of Statistics (NBS) places the inflation rate at 33.40 per cent, and food inflation at over 40 per cent.
According to the CBN report, the poll was conducted from July 22 to 26, 2024, with a response rate of 99.7 percent with its sample size drawn from the NBS master sample list of 1,665 households in the 36 states of the federation and the Federal Capital Territory.
The report titled Household Expectation Survey published on its website, shows that many Nigerians intend to reduce their spendings on non essentials in the next 3 to 6 months. They however plan to spend 54.9 per cent of their income on food items in the same time range.
The report says: “Spending outlook for the next six months showed that consumers plan to spend a substantial amount of their income on the following items: food and other household Items (54.9 points), education (35.4 points), transportation (30.2 points), electricity (20.0 points) and medical expenses (12.2 points).”
On the other hand, the respondents do not plan on high end purchase like housing, car and electrical appliances. They also do not intend to spend on any form of investments nor save their income.
“This reflects their family financial situation in the current month and reaffirms their stance that they will be drawing down on their savings or getting into debt,” the apex bank survey shows.
The overall perception of inflation in July 2024 showed that 83.7 percent of the respondents believed that the current level of inflation was high with an index of -61.1 percent.Further breakdown by income group revealed that respondents in the ₦150,001- ₦200,000 income group believed that inflation in the current month was too high with an index of -66.4 per cent.
The above ₦200,000 income group which stood at -58.3 index per cent, had a less negative index, indicating the least pessimism on inflation expectation for the current period.
The survey however shows that many Nigerian households expect the naira to continue to fall over the next three months but strengthen in the next six months.
The current rate of the local unit is ₦1,598 per USD on Friday after is descended in value, ending the month of August negative. This is even as it further fell to ₦1,639 per USD due to the shortage of the Dollar. The Naira had made some gains at the beginning of the second quarter of the year, but fell drastically, making it the world’s worst currency after the Lebanon pound.
The respondents are however optimistic that the CBN’s monetary policy decisions will see the battered naira make a turnaround in the beginning of the coming year, 2025.
Also, the respondents of the poll show pessimism as they expect inflation, borrowing rates and unemployment to keep rising due to harsh macroeconomic pressures.
“The survey result showed that 80.9 per cent of the respondents believed that the economy would end up weaker, while 3.2 per cent opined that it would be stronger,” the CBN survey revealed.
Factors that played a crucial role in shaping the perception of inflation among businesses include: Energy costs increased from 90.6 points in June to 91.8 per cent in July, making it the top driver.The exchange rate remained consistently high with a slight increase from 88.3 in June to 88.8 in July. Transportation is the third driver of inflation during the review period with 88.5 per cent.
The current state of the economy is barely captured with these figures. Fuel Scarcity, increase food prices, Gas Scarcity and increased tariff rates continue to bite the Nigerian man whose minimum wage of 70k is yet to be implemented.
