Do Nigerians Enjoy the Lowest Cost of Living in Africa?
Contrary to widely reported news that Nigerians enjoy the lowest cost of living in Africa, the country of 220 million has one of the highest barriers to enjoying a low cost of living there.
The misinformation or mischief that “Nigerians still enjoy the lowest cost of living in Africa” came from an incomplete reading and assessment of data from a global market analytics company, Numbeo, which reported the cost of living in 24 of 54 African countries.
The Presidency, refuting the claim by former Vice President Atiku Abubakar that the government’s policies have created intense cost of living pressures had said: “Recent comparative cost of living indices show that Nigerians still enjoy the lowest cost of living in Africa,” the Punch reported.
Several mainline media organisations reported this sentiment. Let’s see how factual this is.
First, Numbeo never claimed that the 24 countries it reported were a normal and representative sample of Africa’s 54 countries. The data did not mean that the cost of living in Nigeria is cheaper than in the other 30 African countries that were not reported.
So, it is incorrect to say: “Nigeria has the lowest cost of living in Africa,” relying on the Numbeo data.
The Spread Sheet that led to the mischief/misinformation on the Cost of Living. Source: Numbeo
Numbeo clarified that the Cost of Living Index (Excluding. Rent) “indicates the relative prices of consumer goods like groceries, restaurants, transportation, and utilities. It excludes accommodation expenses such as rent or mortgage. For instance, a city with a Cost of Living Index of 120 is estimated to be 20% more expensive than New York City (excluding rent).”
Nigeria’s average cost of living index of 19.3 means the cost of goods and services (minus rent) is about 80.7% less expensive than in New York. City
Secondly, and most importantly, while Numbeo estimated Nigeria’s cost of living (without rent) at 19.3, the least among the 24 countries reported, it made things clear by adding the local purchasing power index for each country too.
Here, it is clear that Nigeria has the 3rd weakest purchasing power index (of 9.4) among the selected countries, weaker than Cameroon and Ivory Coast alone.
According to Numbeo, the Local Purchasing Power Index “indicates the relative purchasing power in a given city based on the average net salary. A domestic purchasing power of 40 means that residents with an average salary can afford, on average, 60% less goods and services compared to residents of New York City with an average salary.”
This means that while the general prices of things in Nigeria are 81% cheaper than in New York City, due to their extremely low average incomes, Nigerians cannot afford 91% of the same goods and services in the same New York City.
In short, the Nigerian who earns the average income in the country cannot afford 91% of things that are 81% cheaper in Nigeria than in New York.
Nigeria’s weak purchasing power index shows that an average Nigerian cannot purchase and enjoy their low cost of living because their average income, relative to price levels, is relatively lower than that of people in 21 of the 24 reported African countries.
That is, when low incomes are confronted with high food costs, rising inflation, and a general increase in the cost of basic social services, Nigerians’ power to purchase proves to be weak.
Furthermore, the widening disparity between incomes and the cost of living may exacerbate existing socioeconomic challenges, placing an additional burden on households and communities already struggling to make ends meet.
Anyway, the question returns: Do Nigerians enjoy the lowest cost of living in Africa?
No. Nigerians do not enjoy the lowest cost of living among the 24 countries in question because they don’t have sufficient means to purchase and enjoy those relatively cheap goods and services. And as far as the Numbeo Report is concerned, the data never said or meant so.
This situation appears to be more pathetic.
How Rich are you?
Everyone is rich!
It’s just like being old. Everyone is old - a day old, a year old, a hundred years old.
Sound pocket science too is all about planning and living according to your level of wealth where you are.
That is, wealth is relative to the cost of living where you are.
People only become poor when their wealth, from their income or inheritance, cannot pay for the basic necessities of life at the prevailing costs where they live.
Well, when 125 million Nigerians above 15 years old are ranked from the most rich to the least rich, the total wealth (cash and assets) of the individual in the middle is $1,474 or N2.2 million (N2,234,983 at N1,515.592 per Dollar as of February 12, 2024).
At this median wealth level in Nigeria, mid-rich folks in Ghana and Senegal are richer than their Nigerian counterparts, data from the Global Wealth Table indicates.
Yet, when confronted with the prevailing cost of living in Senegal, for example, the mid-rich Nigerian can still afford more expenditures, savings, and investment to cope due to the lower cost of living in Nigeria.
An understanding of how rich you are relative to the wealth of people around you (in your locality and country) could also inform the kind of business you want to set up in your area, or the price to set on your little farm produce that will attract high effective demand.
Selling too cheap or too expensive can reduce demand for one’s goods and services.
This is as important as spending on food, rent, and clothing in an area that’s more suitable to your wealth or income level.
So, how rich are you?
For starters, if you’re reading this piece in Nigeria and can fully comprehend it, you’re likely worth more than the country’s median wealth of N2.2 million.
The returns on your investment in education, an intangible asset, could be more than N2.2 million. Only some types of wealth are not easily convertible to cash.
How Rich is a Graduate?
Nigeria’s federal government has joined other countries in their belief that a college graduate is rich enough to pay up any cost accrued in the course of getting their degrees, diplomas, or certificates.
In a way, a yet unearned certificate is now classified as collateral for loans.
The Federal Government has announced that the Student loan scheme will be launched on February 21st, 2024. Also, the application window will be opened to eligible candidates nationwide on the same day, the Executive Secretary of the Nigeria Education Loan Fund, Dr Akintunde Sawyerr, The Punch reported.
This comes at a time when Nigerians now spend 6% of their total income on education, a 5.5% increase over the 0.6% in 2010.
During the same period, the total non-food expenditures that included social services like education, health, transport, and rent increased by 22.7%.
Major changes are also seen in the total expenditure on health which increased by 5.4%, from 0.73% in 2010 to 6.12% in 2020. Transport increased by 3.1%, from 3.39% to 6.44%.
Meanwhile, the trends differ across regions. The South-West spends an extra 6.6% on education compared to 5.9% in the south-east. The expenditure on education in the southwest is the highest in the years reviewed.
In an earlier edition of this newsletter, we mentioned that the increased expenditure on education, health, and other basic life essentials may either be due to shifting priorities or the increased cost of quality education and healthcare services in the country.
Well, with the recent moves by University management to increase tuition fees, it is possible that higher household expenditures on education actually result from higher fees charged for educational services.
Students of the Federal University of Technology, Akure earlier in January organised a protest against the plans of the university’s management to hike tuition fees for students, The Cable reported.
The report noted that old students who were paying N35,000 would now pay N130,000. This represents a 271% increase.
Likewise, in September 2023, students of the University of Lagos (UNILAG) staged demonstrations to oppose fee hikes, which were increased from between N26,000 to N76,000, to a range of N120,750 to N240,250 depending on courses of study and academic levels.
Interestingly, Nigerians have to deal with the high cost of living even as the minimum wage remains the same or with little increment. The major change in the national minimum wage was between 2019 and 2020 when it moved from N18,000 to N30,000. After the increase, the minimum wage remains static for 4 years.
Good news?
The student loan initiative aligns with a key campaign promise Tinubu administration. His Renewed Hope document states “We will institute a pilot student loan regime like the program established by the Lagos and Kaduna State Governments. This will expand access to education to all Nigerians regardless of their backgrounds. At the same time, this will give institutions the ability to charge more cost-reflective tuition fees.”
It also specifies that the loan program will have a maximum limit any student may borrow and must have flexible repayment.
What sets this loan scheme apart is its provision for flexible repayment options and zero interest charges, serving as a significant incentive for potential borrowers.
According to the Access to Higher Education Act, 2023, a beneficiary of the loan shall commence repayment two years after completion of the National Youth Service Corps program and repayment shall be by direct deduction of 10% of the beneficiaries’ salary at source by the employer and credited to the Fund,
Where the beneficiary is self-employed, 10% of her total profit monthly shall be remitted to the Fund.
As a measure of deterrence for defaulters, a fine of N500,000 or imprisonment for a term of two years or both shall be applicable.
It appears it is the government's belief that a graduate would be rich enough to part with a fine of N500,000 in case he defaults on the student loan.
Hope you enjoyed this edition of Pocket Science. It was composed by Funmilayo Babatunde.