Do you find yourself having to recalculate your expenses against your income? Yes! You are not alone on this; income seems limited in growth while every other expense keeps growing rapidly and constantly. According to The National Bureau of Statistics (NBS), the rate of inflation is 24.08%.
The NBS report for July 2023 revealed that the Consumer Price Index rose by 1.29% compared to June 2023. The cost of foodstuffs increased to an estimated percentage of 26.98% in July as compared to 25.25 in June 2023. With the biting hike in the price of power, fuel, transportation, and many more, families’ spending power is decreasing steadily, contributing to the rise in the cost of living in such a time.
Utilizing monthly data from the Nigerian Bureau of Statistics regarding food prices, It is calculated that a family of four with a moderate income, who consume essential foods such as eggs, milk, bread, rice, beans, garri, beef, fish, plantains, and vegetable oil, allocates approximately N70,000 Naira (equivalent to US$100) for their food expenses in January 2022.
As of August 2023, this same family would have spent around 150,000 naira ($157) on food, signifying over an 80% rise. Statistics aggregated by the World Economic Forum demonstrate that the mean Nigerian household allocates roughly 56% of its earnings to food, making it the highest proportion globally.
Unfortunately, for the majority of families in Nigeria, salaries and wages are finding it difficult to keep pace with the increase in costs, invariably reducing the amount households can spend on goods and services.
Let’s consider an average family in Nigeria earning a combined monthly salary of N350,000 (USD $455) and having the following major expenses to compete against it monthly like transportation, Rent, School fees, food, power, and many others. Research has revealed that an average family in Nigeria spend as outlined in the table below:
| Item | % | |
| 1. | Transport | 15.8% |
| 2. | Monthly Rent | 31.6% |
| 3. | Food and supplies | 26.3% |
| 4. | Power | 15.8% |
| 5. | Others – Family support in the village | 10.5% |
Rent: Drawing an inference from a family of 5 living in Surulere, Lagos Mainland area in Nigeria. Occupying a 2-bedroom apartment in one of the major cities in Lagos such as Surulere, will be paying the sum of N1,000,000 (USD $745) on rent annually. Rents are also paid annually in Nigeria. This implies that the family will have to look for viable saving schemes that they can use to save up the money. They also need to ensure that the contract they sign does not allow the landlord to change rent without prior warnings.
Food and Other Groceries: Living in such a city comes with its added advantages and disadvantages, part of which is the high cost of food commodities. Such a household will need to set aside the sum of N200,000 (USD $260) monthly for food and some non-food items.
Plan your shopping trips and do so with the help of a grocery list with estimated quantity and price. Consider bulk purchases from major markets such as Mile-12 and Boundary. Nevertheless, a survey shows that only about one-third of people keep to their list. The time value of money spent on buying unwanted items and services is more expensive, as it may negatively affect other items that ought to have been purchased.
When grocery trips are duly planned, non-perishable foods can be purchased in bulk and stored. This will positively affect cash as the cost of items will be reduced and more money will be available for other biting needs or savings.
Transportation: Commuting from this location to their offices will also come with a price of about N50,000 (USD $65). The amount allocated to transport by each family has skyrocketed after the removal of fuel subsidy. Bus trips from Surulere to Lagos Island now cost 70% more. Although this is a much smaller percentage of the household budget compared to rent and food, parents can consider remote working a few days a week. With 2 days of remote work per week, people can save up to 20% of the money allocated to transport.
Power – Electricity and Fuels for generator: With the increase of about 40% in the rate of electricity, households now have to spend additional resources to meet their demands. Depending on the band allocated to the area where they are, the increase in the minimum tariff is a major game-changer for families. Some spend as high as N50,000 a month on electricity.
Families can adopt simple measures to reduce the amount spent on this very essential. Simple adjustments such as ensuring children don’t leave appliances on when not in use, to avoiding keeping appliances on standby. Cold shower with its inherent health benefits is also a viable alternative.
Those who can afford additional expenditure can also invest in solar power solutions. Although the cost of deployment could be prohibitive, there are several options that allow installment payments.
Sustainable tailored strategies need to be employed in order to survive and thrive in Nigeria, regardless of the economic condition in the country. Here are other alternative suggestions that could be exploited to increase household income to support families in navigating their way through this difficult period.
Reduce Impulse Buying
When next you see that beautiful or shining item that seemingly feels like you just have to possess it, take a pause and ask yourself how your life will be negatively impacted if you do not own this and how your life will be positively affected after you own it. Do I already have something similar? After duly answering the above queries, you can give yourself a few weeks, if you’re no longer interested, you will definitely be thankful for not falling prey to impulse buying.
Mastering the act of restraining impulsive expenditures paves the way for both financial independence and purposeful lifestyle choices’
Bukola, Age 40
Clear and detailed budgeting is a great tool to help such households curb impulsive and excessive buying. This will help you be on top of your spending game. Aside from budgeting and prioritizing your spending there should be space for budget monitoring and review. There might be some items that seem necessary at the beginning of the period that may no longer be needed after a while; keeping a close watch on your budget helps us escape the mistake of double purchases or unwanted expenses.
Explore Second Income Stream
You will hardly go wrong with exploring other right sources of income inflows, especially in our current world it is almost abominable to depend on just a stream of income. Researching and exploring multiple right means through which income can flow in for households cannot be overemphasized. Aside from the more funds available to meet the never-ending needs of the family, multiple flows of income provide more financial security and peace which will invariably impact positively on the overall health of the household.
Turning passion into profit has been identified as a means of developing other income flows. Once you are able to identify a problem in your communities or surroundings that you can comfortably solve. Freelancing or taking up part–time jobs can also help supplement your income.
Start your journey into independence through small businesses or virtual shops that do not require the acquisition of physical stores. With the rise of dispatch services, many have found this new form of business a steady way of supporting their household income
Financial Literacy
Ignorance of money matters, government policies, and economic news that may impact your household’s financial situation. Get the right information and educate yourself about personal, business, and investment options, their effects, and their impacts so as to make informed decisions, reduce spending on expenses that could have been avoided, and save more money.
This will also help reveal the new trends families employ for maximum survival. Money is tight fighting against numerous needs; one wrong financial decision can adversely impact the family a great deal.
Avoid High-interest Loan
This is definitely not a good time to buy for impressing or just to showcase. As much as you can it is advisable to reduce borrowing, especially from high–interest lenders. This can lead to financial strain and stress; as borrowers end up paying more servicing their debts.
For some necessary loans with regards to a family of three, research shows that reducing the monthly installment expenses to less than or equal to 40% of the family net income can help the household escape being debt-trapped. A debt trap is a situation when the household’s monthly income is not enough to service their loan commitments. To avoid debt, there is a need to explore multiple ways of living our lives and enjoying life for little or less.
In the face of the challenging cost of living crisis in Nigeria, families of three can find solace in the fact that strategic financial decisions and prudent money management can indeed lead to a more stable and fulfilling life. By embracing the money-saving ideas outlined in this guide, families can navigate the turbulent economic landscape with resilience and hope. From budgeting wisely to cutting unnecessary expenses, exploring additional income streams, and making thoughtful choices, the path to financial security is illuminated.
Remember that every small step taken towards financial prudence contributes to the larger journey of safeguarding your family’s well-being. As you implement these top money-saving ideas, you not only survive but also thrive, ultimately achieving a more secure and prosperous future for you and your loved ones.
