Despite the hope of leaving economic recession by government and Nigerians, a study has revealed that Nigerians are engaging in spending activities more than saving and investing. This is contrary to what economists have suggested as the best choice for leaving the recession.
This was the outcome of 2017’s Economic Recession Outlook carried out by Enterprations Limited, a Lagos-based management consulting company.
In line with their monthly income, the research shows that Nigerians are making a discrete choice among the three indicators –spending, saving and investing. Nigerians are spending, saving and investing instead of spending, investing and saving. In other words, Nigerians are using their money mostly for purchasing decision rather than investing and saving decisions.
Spending was significant on non-durable goods than durable ones. Food, household services, and public transport are the most essential commodities and services Nigerians are spending on. Based on location, the severity is being felt the most by Nigerians residing in Ibadan while it is moderate, normal and almost negligible in other locations.
“We categorized spending, saving and investing as strategic choice one while we developed strategic choice two, using spending, investing and saving as the basis. With the strategic choice one, Nigerians are expending 50% of their income on spending activities, 30% and 20% on saving and investing activities respectively. Based on the choice modelling approach towards the decisions making during uncertainty situation such as economic slump, we formulated spending, investing and saving, as strategic choice two. Within this choice, Nigerians are expected to disburse 50% of their income on spending activities, 30% and 20% on investing and saving accordingly,” Mutiu Iyanda, writer of the study highlighted.
“For those who have the financial strength towards saving indicator, they are making the decision because of retirement, health expenditure, precautionary and travel. When saving decision is made, majority are considering the possible return, associated risk, convenience and seamless withdrawal of the savings,” the study stated.
Findings show that effect of the recession is being moderate on Nigerians earning between N50, 000 and N150, 000, when saving is considered. Whereas it is severe on the people earning between N151, 000 and N200, 000, when spending is measured. The same effect is being experienced under the investing indicator. The study established that Nigerians’ marginal propensity to invest decreases due to fluctuation in monthly income. The same factor contributed to the reduction in marginal propensity to save.
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