The removal of petrol subsidy and the depreciation of the naira have exacerbated the country’s economic challenge, causing inflation to hit a 28-year high of 34 per cent in June. As families and individuals struggle to meet their basic needs, FELIX OLOYEDE explores strategies they can adopt to survive the current economic crisis in the country
Nigerians have been battling hardship for a long time, and they are blamed for protracted poor leadership, corruption, and weak institutions. This worsened when President Bola Tinubu, in his inaugural speech in May 2023, announced an end to the country’s petrol subsidy regime. The immediate impact of the President’s pronouncement was the average price of petrol, which is the country’s main energy source, jumping from N238.11 per litre in May 2023 to N545.83 in the following month, according to the National Bureau of Statistics. It has further risen to $1.17 per litre in June this year.
The country’s economic crisis was further compounded when the Central Bank of Nigeria decided to float the local currency, causing it to depreciate by over 70 per cent in the last year to N1617.08/$ at the official market as of Friday. The resultant impact of this is the skyrocketing of the prices of basic commodities, as the country relies heavily on imports, especially refined petroleum products.
Consequently, Nigerians have been struggling to survive due to a cost-of-living crisis, due to high inflation, which has significantly eroded their purchasing power.
Meristem, an investment firm, highlighted some strategies that individuals and families could adopt to cope with the current challenges.
Categorise your savings
Saving is one of the best ways to plan for eventuality. It is a buffer for unplanned financial expenses. If you want to achieve your financial goals, you must learn to save. And it helps you reach your financial goals. “While households with irregular income are more likely to struggle with building up savings, opportunities to save may come in the form of reducing shopping costs or buying refills for household cleaning products,” Meristem analysts stated.
The investment noted that most people who actively save keep their savings for holidays, emergency funds, future purchases and long-term goals all in the same account. “The problem with this approach is that when you need to withdraw from the savings account, you don’t know which part of your savings you’re withdrawing from.
“One way to organise your savings is by separating them into the categories you are saving for. This could be done by creating multiple savings plans on your WealthBuddy app; for example, you could have one as emergency savings, another as lifestyle savings and even many more, and save separately into them. You can clearly see how your savings for each goal are growing, which encourages you to keep the savings momentum going,” it suggested.
Cut your expenditure
One of the main challenges of our current economy is the exorbitant cost of living, particularly regarding food. A business analyst with 6ixthSense Consulting, Bolaji Babalola, told The According that people have to prioritise their daily expenses and see which they could do without.
“I used to give my outfit to dry cleaners. Now, I have limited that to only my traditional wear. All my corporate shirts are washed, starched and pressed at home. So, prioritisation would allow one to see the things that can be done cheaply, freely or left undone,” he explained.
According to Babalola, that means no unnecessary visitations, noting that meetings that can be done virtually and should not be done physically.
He added that to cut costs, one may need to reduce refreshments—no in-between meal refreshments or appetizers—and reduce entertainment or unnecessary partying.
According to Meristem, individuals and families must learn to cut down on their energy, electricity and water consumption.
“To save electricity and energy, and be vigilant when turning things off. It is easy to accidentally leave a light on or to keep your TV on standby but this is a massive energy drainer and can cost you more month on month. Make it a habit to do a ‘plug check’ every time you leave the house, and you will notice a change. It is also a good idea to switch your light bulbs to LEDs to save more energy and reduce your lighting bills,” it advised.
Reduce debt
To be able to cope with the currency hardship, many people are turning to loans, especially loan sharks. This is further worsening their situations instead of providing them with succour.
“Taking more debt when living expenses are on the rise can easily sink you deeper into the debt hole. Instead, coming up with a plan to pay off debts will eventually free up your cash flow,” the investment noted.
It advised that the debt snowball approach or the debt avalanche method should be adopted during an economic crunch.
According to Meristem, the debt snowball approach prioritises paying off your smallest debts first, before moving on to larger loans. Seeing your debt clear up motivates you.
It added that the debt avalanche approach tackles the debts with the highest interest rate first and will thus save you the most money as your high-interest repayments are eliminated.
It noted that whichever approach you decide to use, seek the opinion of a professional financial advisor.
Increase sources of income
A time like this is the best time to build a financial safety net through saving and investing. It is time to develop other sources of time. Babalola stated that people should start providing services (or products) that are needed by their communities. “There are services men still would not do without, no matter how hard the economy is,” he mentioned.
He listed some of the services people could consider during this economic crisis for increased income, such as Food processing and production; water supply and production; delivery and logistics services; teaching and training, etc.
“As much as some of these services are capital intensive, some are easy to start without or with less capital,” he asserted.
“Traditionally, equities (stocks) have offered some protection against inflation, as their value can rise alongside increasing prices. This doesn’t guarantee success, but it can be a consideration when building your investment portfolio,” Meristem averred.
Put your idle fund to use
According to Meristem, leaving large sums of money sitting idle in a bank account might not be the most effective strategy, especially in an inflationary environment.
“However, the best course of action depends on your circumstances and risk tolerance. Consider exploring low-risk investment options that can still offer some growth potential while maintaining easy access to your funds if needed,” it remarked.
Skills development
Developing new skills is a very important coping mechanism for the current economic crisis. It will help increase your income.
“This is a time people need to learn and develop skills, like baking, fashion, teaching, etc. This is a period when everyone must offer value in a way. If the economy is hard, that means no one would give “free money.”. People will give their hard-earned money. in return for a sizeable amount of value,” business analyst Babalola posited.
According to Meristem, learning a new skill is also a great way to enhance your career.
“You become a high-value individual when you know something the next person does not know. Knowledge and information applications are vital in today’s job market,” it declared.
The investment firm noted that a business owner could design more relevant products to meet the needs of consumers to create additional revenue sources.
“There are freelancing and remote jobs you could do from the convenience of your home or office to earn more. Inflation affects everyone in the world, but there has never been a better time in civilisation when there were options to combat inflation on multiple fronts. With technology, we are well-equipped with solutions to enjoy better days ahead,” it added.
If you can apply these strategies, you will have no problem coping with the current economic crunch. Remember, this is the time to save, categorise your investment, cut costs, make idle funds work, and develop new skills.
