Your N200,000 ($526) of 2015 probably worth more than your N400,000($1,052) of today (in just 6 years)

If you are waiting for the time you will move from being an Officer to a Senior Officer or a Manager which may be in the next 3 to 6 years before you start saving or investing, that time may never come. Your salary will surely increase, but the value of money with time, will gulp whatever increment you will have in your monthly take-home and even leave you worse off. With the high rate of inflation in the country, devaluation of the Naira and high exchange rate your N200,000 ($526) of 2015 worth more than your N400,000 ($1,052) of today.

What is the Statistic saying?

13.7% is the average inflation rate of Nigeria in the last five years from 2015, with the price of food and other household basic commodities doubled within this period. The exchange rate of the Naira to the Dollar according to the Central Bank of Nigeria (CBN) as of today 28th of February 2021 is N380 even though the unofficial rate (parallel market) is about N410. In this same time as 2015, the exchange rate was N197.9. N380 represents a 92% fall in the Nigeria currency to the Dollar in 6 years.

On January 18, 2015, the Nigerian government announced a reduction in the fuel price of petrol from N97 per litre to N87 per litre but a litre is now selling at N165 representing an 89.7% increase. Currently, we already hear about a likely increment of above N180 due to the rising price of crude oil, and the landing cost of fuel is already put at N180 as I am typing this article, most fueling stations are currently not selling fuel in anticipation of the new price. More so, on June 3 2015, the Nigerian Electricity Regulatory Commission, NERC, issued new electricity tariffs that will become effective for residential consumers from 1 July 2015 with energy charge rise from N14.23 per kWh to N18.00 per kWh and this has since increased to N45.69 as of today, representing N154% increase.

Now Statistics aside, what is the Market saying?

Usually, statistical figures are provided to help understand the context and make decisions based on available data, but the ordinary man in the street is not concerned with statistics, all he wants to know is how these figures help put food on his table, for instances, we have been told that Nigeria Gross Domestic Product (GDP) grew 0.11% in the three months through December and therefore we are out of recession, but this does not translate to more food on the table of the ordinary man in the street. So, let us put the statistical figures aside and see what the market is saying in a month for basic hold items for a middle-income earner. We start by listing some few items that are usually used at home and compare their prices in 2015 and now in 2021.

Table 1: Price Changes for some basic household items between 2015 to 2021.

Using the table above, we try to simulate a total estimated average monthly cost of food items and other basic consumables for the two years of 2015 and 2021 and then see the difference in cost.

 Table 2: Average Monthly Family Consumption

The difference between the monthly cost of 2015 and that of 2021 is N50,044 which represent a 95% increase in family consumption in the period.

Other factors.

That is true, the estimate of 95 is less than 100 however, you are not expected to be the same from 2015 till now, if you were single in 2015, you likely to be married now with at least 2 kids and if you were married with a kid in 2015 you are expected to have 2 more kids now. This means your monthly expenditure would not be the same as in 2015 in 2021. You are likely to be spending more on children school fees and health, you now have more mouth to feed and care for and more people to accommodate, so your rent will likely be higher so also is the cost to maintain your vehicle. Due to your growth over this period, now a Senior Officer or Manager, more people depend on you for support and so is your sense of responsibility. All these will be well over an additional 10%, so your 400,000 of today is worth less than the 200,000 of 2015. And yes, forget about your investment in the bank, within this same period they are 100% less too.

 Is there hope in sight?

In January 2021, the Consumer Index Price in Nigeria stood at 361.2. Compared to January 2020, the CPI increased by 16.5 per cent. This means that inflation has been constantly increasing in the last months. Nigeria ranks as one of the countries with the highest inflation rate worldwide, the price of fuel is about to be increased and the Dollar is in a continuous spiral against the Naira, so, as far as the eye sees, there is none. However, as individuals, well, we can hope for a miracle. Meanwhile, you can start by saving our money in anything that relates directly to foreign exchange like the dollar, gold e.t.c so that the values of our investments increase as the foreign currency increases, also, try to invest in yourself, use your money of today to invest in yourself, learn a new skill, get a certificate, get an additional degree, your value increases as the year goes by. Time does not wait for anyone, so we need at all see that we are making progress and if you wonder why you have not been able to any time tangible of recent in spite of your increase in salary, there goes your answer.