The Central Bank of Nigeria (CBN) has released its Consumer Expectations Survey (CES) for the fourth quarter of 2019 and it revealed that Nigerians will distance themselves from purchasing luxury items. This is could be attributed to the overall buying intention index in 2020 that is expected to stand at 36.5 index points.
The report stated that the conditions index for big-ticket items in the current quarter stood at 29.7 points.
What it means: This means that most consumers did not intend to buy big-ticket items during this period, as many Nigerians would not purchase luxury items like cars, houses, and other expensive items in 2020.
The negatives for the year: In CES, the apex bank warned that rising inflation and high prices would negatively impact the purchasing power of consumers.
Factors projected to drive increase in prices are food and other household needs, savings, purchase of appliances/consumer durables, education and purchase of houses and vehicles. Consumers will not be willing to borrow cash either for the purchase of these goods or any items as projection shows the borrowing rate will fall.
Surprisingly, consumers still expect a positive overall outlook for the next 12 months despite the inflation, price hike and projected unemployment in the country for 2020. To cap this up, the report shows the unemployment index remained positive at 21.0 points in Q4 2019. Therefore, the rise in unemployment is expected by consumers in the next 12 months
But consumers’ overall confidence outlook rose in Q4 2019, as consumers were optimistic in their outlook although consumer confidence is lower than the corresponding period of 2018.
“Consumers also had a positive outlook for the next quarter (current quarter) and the next 12 months.
“The majority of consumers believe that the next 12 months would not be an ideal time to purchase big-ticket items like motor vehicles and house.
“Most respondents expected the naira to remain unchanged; inflation rate to rise, and borrowing rate to fall in the next 12 months,” the report read in part.
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Positives for the year: According to the report, consumers have positive outlooks due to improved family income and family financial situation. The expected increase in net household income, expectations to save a bit and/or have plenty over savings and an anticipated improvement in Nigeria’s economic conditions in the next 12 months birthed the favourable outlook.
What this means: Supermarket, real estate owners, and other consumer-driven goods will experience a drop in demand for their products and services. And with unemployment projected to rise in 2020, the impact is likely to be significant at most. The Nigeria Employers’ Consultative Association (NECA) had reported that the rate of unemployment in Nigeria may rise to 33.5% next year from the current rate pegged at 23.1%.
If demand drops in these sectors, it means the revenue contribution by these sectors to the Nigerian economy will drop, or growth will be slow for the businesses trading big-ticket or expensive items as earlier mentioned.