Household consumption in Nigeria contracted sharply in real terms in 2024 as surging prices eroded the purchasing power of millions of families, according to provisional data contained in the Central Bank of Nigeria’s latest statistical bulletin.

Figures on Gross Domestic Product by expenditure showed that household final consumption expenditure at 2010 constant purchasers’ prices declined from N45.41 trillion in 2023 to N31.12 trillion in 2024.

The drop represents a real contraction of about N14.29 trillion, or roughly 31 per cent year on year, pointing to a significant reduction in the volume of goods and services consumed by households. Constant price data adjust for inflation, allowing a clearer measurement of actual economic activity rather than changes driven by price increases.

When household consumption measured at constant prices falls this sharply, it indicates that families are materially cutting back on consumption rather than simply paying higher prices for the same items. However, data measured at current purchasers’ prices present a contrasting picture.

Household consumption at current prices increased from N146.69 trillion in 2023 to N173.01 trillion in 2024, representing a rise of about N26.31 trillion or nearly 18 per cent. Unlike constant prices, current price figures reflect spending in nominal naira terms without adjusting for inflation.

The divergence between rising nominal spending and plunging real consumption underscores the depth of Nigeria’s inflation problem, showing that households are spending more money but receiving significantly less value as inflation absorbs a large share of incomes.

The steep decline in real household consumption aligns with the sustained double-digit inflation recorded throughout 2024. Nigeria’s headline inflation rate opened the year at 29.90 per cent in January, up from around 28.9 per cent in December 2023, reflecting persistent price pressures early in the year.

Inflation continued to accelerate over the course of 2024, with official data indicating that it reached approximately 34.80 per cent in December, one of the highest annual inflation rates recorded in the past decade.

The year-on-year acceleration in inflation was driven largely by persistent increases in food and other essential prices and was marginally higher at the end of the year compared with November.

Prolonged high inflation compounded the cost-of-living crisis faced by Nigerian households. Rising prices of food, transportation, energy and accommodation pushed many families to prioritise basic survival needs, leaving little room for discretionary spending.

Even staple food items became increasingly unaffordable for many low-income earners, while the removal of petrol subsidy and exchange rate pressures filtered through almost every aspect of daily life.

The data also revealed a worrying decline in real employee earnings. Compensation of employees measured at 2010 constant purchasers’ prices fell from N28.27 trillion in 2023 to N25.48 trillion in 2024.

This represents a real decline of about N2.78 trillion, or nearly 10 per cent, indicating that when adjusted for inflation, the total value of wages and salaries in the economy bought less than in the previous year.

In contrast, compensation of employees at current prices rose from N63.83 trillion to N75.59 trillion, a nominal increase of roughly N11.76 trillion or about 18 per cent.

The disparity shows that while employers may have increased salaries in nominal terms, wage growth failed to keep pace with inflation, leading to shrinking real incomes and intensifying pressure on household consumption.

Economists typically rely on constant-price indicators to assess whether an economy is genuinely expanding or contracting. In this case, the slump in real household spending points to weakening domestic demand, a critical driver of economic growth.

Household consumption accounts for the largest share of GDP on the expenditure side. When consumption declines at this scale, sectors such as retail, manufacturing, services and hospitality are likely to experience lower sales, reduced output and slower investment.

Earlier in 2024, the Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Muda Yusuf, warned that persistent inflationary pressures remained deeply troubling.

Reacting to inflation figures released by the National Bureau of Statistics in February 2024, Yusuf said in a statement that purchasing power had continued to weaken in recent months, pushing more Nigerians into poverty.

He cautioned that as inflation maintained an upward trend, economic growth could remain subdued, while the risk of stagflation increased.

“Regrettably, the major inflation drivers are not receding; if anything, they have become even more intense. These include the depreciating exchange rate, surging transportation costs, logistics challenges, forex market illiquidity, astronomical hike in diesel cost, insecurity in farming communities, and structural bottlenecks to production. These are largely supply-side issues.

“The weakening of the naira against the currency of our neighbouring countries [CFA], has continued to incentivise the outflow of agricultural products to these countries. This is complicating the supply side challenges, especially of food crops,” the CEO said.

Yusuf added that elevated inflation was increasing pressure on production costs, making it more difficult for businesses to remain profitable, eroding shareholder value and weakening investor confidence.

By January 2024, the National President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, also said rising inflation was hurting the private sector and the wider economy.

He said, “This is because inflation has led to a loss of consumers’ purchasing power, increased production costs, and a reduction in profitability. Inflation has made our businesses less attractive for investors and, by extension, the economy.”

Rising inflation and weak labour income pushed an estimated 14 million Nigerians into poverty in 2024, according to the World Bank’s Macro Poverty Outlook: Country-by-Country Analysis and Projections for the Developing World.

The report said nearly 47 per cent of Nigeria’s population now lives below the international poverty line of $2.15 per day, as high inflation and structural economic weaknesses fail to keep pace with rapid population growth.

“Labour incomes have not kept pace, pushing an additional 14 million Nigerians into poverty in 2024. An estimated 47 per cent of Nigerians now live in poverty (or below the international poverty line of $2.15),” the report stated.

In response to rising poverty levels, the World Bank noted that the Nigerian government has introduced temporary cash assistance programmes targeting 15 million households.

Under the initiative, each household is expected to receive N75,000 in three instalments, with the programme projected to benefit about 67 million people.

The World Bank added, “Poverty is estimated at 52 per cent in 2026. Reforms to protect the poorest against inflation and boost livelihoods through more productive work are key for Nigerians to escape poverty. A tight monetary stance while avoiding reliance on ways and means remains crucial for moderating inflation.”

The report stressed the importance of sustained reforms, noting that, “While macro stabilisation is essential and currently underway, by itself it is insufficient to enable Nigeria to reach its growth potential. Sustained efforts and the establishment of a credible track record are necessary to achieve sustained progress.

“Economic growth has struggled to keep pace with population growth, contributing to poverty exacerbated by double-digit inflation.”