Nigeria’s households are facing a sharp erosion in purchasing power, as recent economic data show that real household spending contracted by about ₦14.29 trillion, representing a decline of roughly 31 per cent over the past year.
This drop highlights the severe impact of prolonged inflation on living standards, despite a rise in headline spending figures.
In nominal terms, total household expenditure increased by nearly 18 per cent, climbing from ₦146.69 trillion to more than ₦173 trillion.
However, economists note that this apparent growth was entirely offset by inflation, meaning Nigerians are spending more money but receiving significantly less value in goods and services.
The result has been a sharp reduction in the actual volume of consumption across the economy.
Analysts attribute the contraction largely to persistent inflationary pressures, which peaked at about 34.8 per cent by the end of 2024.
Although inflation began to ease in late 2025, falling to around 14.45 per cent by November, the cumulative rise in prices has continued to weigh heavily on households. At the same time, wage growth has lagged far behind rising costs, intensifying financial strain on families.
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The income squeeze has had social consequences. Estimates suggest that around 14 million additional Nigerians slipped below the poverty line in 2024, pushing the national poverty rate to between 47 and 52 per cent by early 2026.
As a result, households have been forced to reprioritise spending. Surveys indicate that food now accounts for about 55 per cent of household expenditure, while allocations to healthcare, education, and other non-essential items have been significantly reduced.
Commenting on the situation, Minister of Finance and Coordinating Minister for the Economy, Olawale Edun, said the government’s economic approach for 2026 centres on consolidation and resilience.
The proposed ₦58.18 trillion 2026 budget prioritises infrastructure development and food security, which the government believes will help stabilise prices and support growth.
Edun also noted that ongoing tax reforms and a tight monetary policy stance are expected to further cool inflation, with official projections suggesting a return to single-digit inflation by early 2026.
However, many analysts remain cautious, citing high debt-servicing costs and global economic volatility.
The decline in real household spending is already affecting businesses, with retail, manufacturing, and hospitality firms reporting weaker demand as consumers focus on basic survival rather than discretionary purchases.
