Household consumption in Nigeria slumped sharply in real terms in 2024 as rising prices eroded the purchasing power of millions of families, according to provisional figures from the Central Bank of Nigeria’s latest statistical bulletin.
Data on Gross Domestic Product by expenditure showed that household final consumption expenditure at 2010 constant purchasers’ prices fell from N45.41tn in 2023 to N31.12tn in 2024.
This represents a real decline of about N14.29tn, or roughly 31 per cent year-on-year, signalling a major contraction in the volume of goods and services consumed by households. Constant price data are adjusted for inflation, meaning they strip out the effect of rising prices to measure actual changes in economic activity.
When this measure collapses, as seen in 2024, it suggests that households are cutting back materially on what they can afford, not just paying more for the same items. However, the same indicator measured at current purchasers’ prices tells a very different but revealing story.
Household consumption at current prices rose from N146.69tn in 2023 to N173.01tn in 2024, an increase of about N26.31tn or nearly 18 per cent. Current price figures are not adjusted for inflation. They simply reflect what households spent in naira terms.
The fact that nominal spending rose while real spending plunged shows that Nigerians are spending more money but getting less value, with inflation swallowing a large share of household budgets.
The steep fall in real household spending is consistent with the sustained double-digit inflation that characterised the year. Nigeria’s headline inflation rate began 2024 at 29.90 per cent in January, up from around 28.9 per cent in December 2023, reflecting continued pressure on prices early in the year.
Throughout 2024, inflation climbed further, with official data showing it reached around 34.80 per cent in December 2024, one of the highest annual rates in the decade.
The year-on-year inflation acceleration over 2024 was driven by persistent increases in food and other essential prices and was marginally higher at the end of the year compared with November.
The persistent high inflation through 2024 compounded the cost-of-living squeeze on Nigerian households. Soaring food, transport, energy, and accommodation costs have pushed many families to the edge, forcing them to prioritise basic survival over discretionary spending.
Even staple food items rose beyond the reach of many lower-income earners, while the removal of petrol subsidy and exchange rate pressures filtered through to almost every aspect of daily living.
The data also paint a worrying picture of real employee earnings. Compensation of employees at 2010 constant purchasers’ prices fell from N28.27tn in 2023 to N25.48tn in 2024.
This represents a drop of about N2.78tn, or close to 10 per cent. In simple terms, when adjusted for inflation, the total value of wages and salaries in the economy declined, meaning workers’ earnings bought less than they did a year earlier.
By contrast, compensation of employees at current prices increased from N63.83tn to N75.59tn, a nominal rise of roughly N11.76tn or about 18 per cent. This again highlights the inflation problem.
While employers may have raised salaries on paper, those increases were not enough to keep pace with rising prices. Real incomes shrank despite higher nominal pay, reinforcing the pressure on household consumption.
Economists often rely on constant-price indicators to understand whether an economy is genuinely expanding or contracting. In this case, the slump in real household spending signals weakening domestic demand, which is a key engine of economic growth.
Household consumption typically accounts for the largest share of GDP on the expenditure side. When consumers cut back at this scale, businesses in retail, manufacturing, services, and hospitality are likely to feel the impact through lower sales, slower production, and reduced investment.
Earlier in 2024, the Chief Executive Officer of Centre for the Promotion of Private Enterprises, Muda Yusuf, said the persistent inflationary pressures continue to be a troubling phenomenon.
Reacting to inflation figures released by the NBS in February 2024, Yusuf said in a statement that the purchasing power had continued to slump over the past few months, pushing Nigerians into poverty.
The CPPE CEO bemoaned that, as inflation maintained an upward trend, economic growth may remain subdued, while the risk of stagflation heightens
“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.
According to Yusuf, the high inflation is causing increased pressure on production costs, making it harder for businesses to maintain profitability. This, in turn, is eroding shareholder value and lowering investor confidence.
By January 2024, the National President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said the rising inflation has negatively impacted the private sector and the economy as a whole.
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.”
As inflation rises, low labour income has pushed an estimated 14 million Nigerians into poverty in 2024, according to the World Bank’s report on Macro Poverty Outlook: Country-by-Country Analysis and Projections for the Developing World.
The report noted that nearly 47 per cent of the Nigerian population now lives below the international poverty line of $2.15 per day, as surging inflation and a struggling economic structure fail to meet the demands of rapid population growth.
It read, “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.”
In response to the rising poverty levels, the report noted that the Nigerian government has launched temporary cash assistance initiatives targeting 15 million households.
Each household will receive N75,000, distributed in three instalments, benefitting an estimated 67 million people overall.
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 World Bank stressed the need for continued 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.”
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