News in brief:
– Nigeria’s economy showed signs of improvement in the first half of 2024, with steady GDP growth.
– Despite seeming positive development, households across the country have faced increasing economic pressure as consumption expenditure falls.
In the first quarter (Q1) of 2024, Nigeria’s real Gross Domestic Product (GDP) at basic prices grew by 2.98% year-on-year, surpassing the 2.31% recorded in Q1 of 2023. This upward trend continued into the second quarter (Q2) of 2024, where GDP growth reached 3.19%, an improvement from the 2.51% recorded in Q2 of 2023. These figures indicate a steady recovery and a stronger economic outlook compared to the previous year.
Despite the overall GDP growth, Nigerians have been spending significantly less. Household Consumption Expenditure dropped by 42.28% in Q1 and further declined by 61.18% in Q2 of 2024 in real terms, compared to the same periods in 2023. This sharp decline suggests that families are struggling to afford basic goods and services, likely due to rising inflation, job uncertainties, and higher living costs.
Rising food prices add to household struggles
The cost of essential food items has surged, making it even harder for households to cope. Selected food prices for 43 staple items in 2024 rose by an average of 99% year-on-year, with basic items such as beans, rice, eggs, yam, and garri increasing by more than 100% during this period. This sharp rise in food prices has further eroded household purchasing power, forcing many families to cut back on essential nutrition and other basic needs.
Meanwhile, government spending increased in Q1 of 2024, reaching a 21.76% growth compared to 17.83% in Q1 of 2023. However, in Q2 of 2024, government spending contracted by 5.54%, compared to the 5.79% growth seen in Q2 of 2023.
Nigeria’s trade sector also showed significant improvement. Net exports grew by 143.83% in Q1 and an impressive 340.30% in Q2 of 2024, reversing the negative growth experienced in the same period last year.
Disposable income and employee compensation trends
National Disposable Income, which reflects the total income available for spending and saving, grew by 12.91% in Q1 and 17.44% in Q2 of 2024. These figures were higher than the previous year’s growth rates, showing increased income flows into the economy.
However, the Compensation of Employees recorded mixed performance. While it grew by 12.16% in Q1, it dropped by 19.68% in Q2 of 2024, compared to the positive growth of 15.08% and 19.41% in Q1 and Q2 of 2023, respectively.
What does this mean for Nigerians?
While Nigeria’s GDP growth indicates economic resilience, the drastic decline in household consumption suggests that many Nigerians are struggling to keep up with rising costs. The surge in net exports and the growth in disposable income are positive signs, but the decline in employee compensation in Q2 raises concerns about job security and wage stability. Moreover, the sharp increase in food prices further worsens the economic burden on ordinary citizens, making affordability a pressing issue.
Overall, the economic outlook for Nigeria remains mixed. For sustained improvement, policies aimed at boosting household purchasing power, stabilising inflation, and creating more job opportunities will be essential.
