Nigeria’s Household Consumption Collapses: Urgent Policy Shifts Needed to Avoid Economic Stagnation

Household consumption in Nigeria is plummeting at an alarming rate, yet the severity of this decline remains largely under-discussed.

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According to the Nigerian Bureau of Statistics (NBS) in its “Gross Domestic Product Report (Expenditure and Income Approach) for Q1 and Q2 2024,” published in July 2025, real household consumption expenditure has been falling steadily since Q3 2023. Specifically:

–        In Q1 2024, household consumption expenditure dropped by -42.28% year-on-year.

–        In Q2 2024, it fell even further by -61.18% compared to the same period in 2023.

–        Quarter-on-quarter analysis shows a 45.71% decline in Q1 2024 and an alarming 99.24% plunge in Q2 2024.These figures highlight a consumption crisis that is too severe to ignore.

Why Is Consumption So Weak?

The primary drivers include:

–        Stagnant wages coupled with soaring inflation, severely eroding purchasing power.

–        The rise of the “sachet economy,” where companies repackage products into smaller, cheaper units to maintain sales. While this strategy ensures daily purchases, it traps consumers in an inflationary cycle, preventing bulk buying that could protect them from price surges.

Consequences

This consumption collapse has contributed to the mass exit of foreign multinationals, as Nigerians can no longer afford products priced in dollars, including essential imports like Premium Motor Spirit (PMS).

What Can the Government Do?

1. Reduce Food Prices through Increased Local Production

While the government currently moderates inflation via food imports, a clear roadmap towards local food production is crucial. However, insecurity in farming regions remains a major barrier, making inflation both an economic and security challenge.

2. Implement Tax Holidays for SMEs

Contrary to perceptions, Nigerian SMEs face heavy hidden taxes, from signage fees to operational levies, often paid before revenue generation begins. A 90-day suspension of these taxes could provide immediate relief to struggling businesses.

3. Fix Power Supply or Offer Targeted Power Rebates

Power accounts for 30-40% of SMEs’ operating costs. Providing manufacturers with an 80% rebate on self-generated power costs, offset against VAT obligations, would lower prices for consumers and stimulate demand.

4. Lower Long-Term Interest Rates

While high interest rates curb inflation, the current 27.5% Monetary Policy Rate (MPR) stifles economic growth. A controlled reduction, despite inflation risks, could empower SMEs to increase production, creating jobs and stabilising prices.

The Nigerian economy is a cycle: household spending drives business revenues, which fuels production, job creation, and ultimately, economic growth. If consumption continues to weaken amid high inflation, Nigeria risks requiring a larger, debt-funded stimulus to reflate the economy.

Swift policy interventions are needed to revive consumption before costs spiral beyond control.

Credit:Nairametrics.

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