+Cereal’s The Real Deal
The Middle Class’ Missing Comforts
A peek into the pockets of the middle class in Nigeria reveals old comforts are slipping out of their financial reach.
Essential needs like housing and healthcare or luxury goods like new cars and travel for vacations, are becoming unattainable for those caught in this economic downturn.
About 4 million of Nigeria’s middle class were reported by the World Bank to have slipped into poverty in H1 2023, and 7.1 million more were at risk of becoming poorer. This was revealed in the World Bank’s Nigeria Development Update.
An earlier survey commissioned by the African Development Bank estimated the middle class at about 23% of the population.
According to the OECD, the daily income of most middle-class individuals in emerging countries is typically between $10 and $100. This means earning between 450,000 and 4.5 million monthly, going by current official exchange rates.
The working class among the middle class find it harder to get a pay rise even in the face of obvious price hikes, including those working in unionised environments.
What can one do?
Healthcare
Nigeria’s health inflation rate has consistently increased over the analysed period, reflecting a concerning trend. Starting at 18.6% in January 2023, the inflation on health products and services had reached 24.6% by January 2024.
This indicates that the cost of healthcare services and related commodities has been rising faster each month in the last 12 months.
Rising healthcare expenses, encompassing prescription drugs, medical services, and insurance premiums, may pressure middle-class budgets and restrict their access to high-quality healthcare.
A persistent rise in health inflation may have severe consequences for people and families, including increased costs for prescription drugs, medical procedures, and general healthcare.
This could make it more difficult for the general public, especially the poor and working class to maintain their well-being and obtain necessary healthcare.
On the government side, for the Nigerian populace to have access to affordable healthcare, it may be essential to address the reasons driving up the rate of health inflation, such as rising expenditure for health personnel, equipment, and supplies.
Furthermore, legislators might need to investigate ways to lessen the effects on the populace and preserve a balance between the cost and quality of healthcare.
And if the government prevaricates on this, the people can still do something.
To reduce skyrocketing out-of-pocket expenditures on healthcare, people can take health insurance premiums.
Above all, maintaining a healthy lifestyle and work-life balance can help reduce the added health insurance premiums charged to people with pre-existing health conditions.
New cars
As of July 2023, the devaluation of the naira and the increase in currency rates for clearing imports caused new automobile prices to skyrocket, according to recent market research by Modor intelligence.
This devaluation had an approximate 15% influence on new car pricing.
The Modor Intelligence forecast on the market size of cars indicates that the current value of the used car (also known as Tokunbo car) market in Nigeria, standing at USD 1.14 billion, is expected to exceed USD 1.74 billion by 2029, showing a Compound Annual Growth Rate (CAGR) of 8.9%.
This growth is partly influenced by the increase in Tokunbo car prices, which grew by nearly 100% following the steep rise in the exchange rate.
Besides the cost of imports, the Nigeria Customs Service (NCS) decided in June 2023 to raise the import duty on vehicles from 39.45% to 39.62%.
The move aimed to reduce reliance on imported cars and boost the domestic manufacturing sector.
The Mordor Intelligence report also indicates that used sedan vehicles remain the favoured choice among consumers seeking to buy used cars in the Nigerian market.
This preference is attributed to the lower prices of sedans compared to their counterparts, such as sports utility vehicles (SUVs) and multi-purpose vehicles (MPVs).
Notable used sedan models that have gained popularity in Nigeria include the Toyota Corolla, Toyota Camry, and Honda Accord, among others, as of June 2023.
As inflation and currency devaluation continue to surge, accessing sedan models of cars may become more challenging for the middle class looking to upgrade their vehicles in the future.
Like the options for healthcare, the middle class, who can scarcely afford to purchase new cars may think of taking premium car insurance to fully secure their current vehicles from the risk of theft or damage through accident.
There is also the need to maintain the old cars well to reduce the risks of damage and the necessity of replacement with a new costly one.
Vacations
Cost and affordability are the paramount factors Nigerians consider when planning international trips, the TGM Global Travel Report 2023 reveals. This is alongside considerations for local culture, history, experiences, and leisure time.
The challenging economic landscape, including a devalued naira, and costlier flight tickets complicates the possibility of summer vacations for many middle-class and poor people in Nigeria. This is besides the usual travel restrictions and stringent visa requirements.
Economic difficulties may thwart middle-class dreams of future vacations. Typically occurring from June to September, summer vacations involve leisure travel for individuals, couples, and families, with international trips often driven by shopping, recreation, and religious ceremonies.