Nigeria Consumer Sentiment Back to Pre Covid Levels

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  • While consumer confidence rose this month, the appearance of a new coronavirus strain dampens optimism


  • Nigeria’s recovery plan brings about positive sentiments for the future as KASI CCI sub-indices see a tremendous rise in positivity


  • Positive consumer sentiment in December in light of the recovery package stands to boost the retail sector in Nigeria

In December, Nigeria’s consumer sentiment increased 4 points, as measured by KASI’s CCI index, from a value of 17 to 21. This increase was led by a 4-point increase in the index of future expectations, increasing from 37 to 41, as well as a 5-point increase in the index of current conditions which rose from -35 to -30.

While consumer confidence rose this month, the appearance of a new coronavirus strain dampens optimism

Nigeria's Inflation sustains sprint, rises to 14.89% y/y in November 2020

 

The increase in the index of current conditions (ICC) was led by a 12-point increase in optimism regarding spending on discretionary items for which the index rose from a value of 6 to 18.

Though the increase in this sub-index was significant, the overall impact on the ICC was offset by the decreasing and highly negative value of the job prospect sub-index. The index fell a further 3 points in December, reaching a four-year all-time low of -78.

Aside from job prospects, the appearance of a new strain of the coronavirus could have also dampened the increase in sentiment surrounding current conditions. After the identification of new strains in the UK and South Africa, Nigeria began observing a number of cases stemming from a new variant as well around mid-December.

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In December, there was also an overall spike in the number of coronavirus cases, bringing the daily average of under 300 cases to anywhere between 500-1000. With this news, a majority of KASI’s COVID-19 Pulse respondents feel that it will still be about 3 to 4 months until people can expect conditions to go back to normal.

Unsurprisingly, a majority of respondents also think the worst of the crisis is happening right now.

Nigeria’s recovery plan brings about positive sentiments for the future as KASI CCI sub-indices see a tremendous rise in positivity

 

In line with the ICC, future expectations rose in December as well, inching up 4 points from an index value of 37 to 41. As the index of future expectations repeatedly increases month-over-month, the index is displaying a recovery pattern that indicates optimism reaching a pre-pandemic high.

The increase was led by an overall increase in positive sentiment as measured by all sub-indexes of the CCI. General conditions in the country, household income, ability to meet regular expenses, and spending on large discretionary items are expected to improve these coming months. sub-indices measuring these parameters respectively increased 6, 1, 16, and 3 points.

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While the economy remains in distress as a result of the ongoing recessionary phase, it is somewhat puzzling that sentiment rose in December and that too somewhat significantly in most sub-indexes.

The answer perhaps lies in Nigeria’s recovery plan. The world bank approved a $1.5 billion package overall for this five-year Country Partnership Framework. The program is aimed to focus on four specific areas: Investing in human capital, promoting jobs and economic transformation and diversification, enhancing resilience, and strengthening the foundations of the public sector.

Additionally, ever since the pandemic hit, millions of jobs were lost. As mentioned previously, this is also reflected in the continued pessimism surrounding job prospects. According to Nigeria’s National Bureau of Statistics, 40% of the youth labor force is unemployed.

There are also currently about 83 million Nigerians (of the 200 million population) who live under $1 a day. To add on top of that, according to the world bank, at least 5 million more Nigerians are predicted to fall into poverty as a result of COVID-19. The job crisis is no joke, not in Nigeria or many other African countries.

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Hence, as a part of the program, Nigeria promises to provide jobs for more than 750 000 young people amid the worsening youth unemployment. The program is valued at $136 million and offers three-month job replacements, paying a US dollar equivalent of $53 a month – less than minimum wage but a significant help for those unemployed.

Positive consumer sentiment in December in light of the recovery package stands to boost the retail sector in Nigeria

 

Nigeria’s GDP is largely impacted by the retail sector as it is the third-largest contributor to overall economic output. With that 90% of the sector is made up of informal retailers. As a result of COVID-19, there is a continuous observation of smaller packaging of consumer goods as a result of falling household income.

Market data from 2020 collected by Trade Depot confirms that this mostly relates to FMCG goods. With consumption patterns focused on necessities over discretionary products, there was a 10% increase in the overall contribution of food items to total expenditure in comparison to 2019.

Online and social media trade increased overall and whether or not that will be sustained is a trend to continuously monitor as the world recovers. With KASI’s data indicating an overall positive sentiment in light of the recently announced efforts to bring about recovery, it is possible that consumer demand and expenditure may see an increase in the coming months.

By Tanya Gandhi, Economic Intelligence Group at KASI

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