14 ways to cut costs, stay ahead during inflation
With inflation currently at a dizzying height in Nigeria, HENRY FALAIYE examines 14 practical strategies to mitigate the impact of rising costs
Nigeria is currently experiencing significant economic challenges, with rising costs of goods and services impacting household expenditures. In the first quarter of 2024, Nigeria’s real GDP grew by 2.98 per cent year-on-year, an improvement from the 2.31 per cent growth in the same quarter of 2023. However, household consumption expenditure declined sharply, with real terms decreases of 42.28 per cent in Q1 2024 and 61.18 per cent in Q2 2024 compared to the same periods in 2023.
These figures highlight the increasing financial strain on Nigerian households, as the rising cost of living continues to erode purchasing power.
However, this upward trend in spending highlights the increasing financial burden on citizens as they struggle to meet basic needs amid a challenging economic climate.
Several key factors have fuelled this surge in expenses. Inflation has continued to rise at an alarming rate, eroding the purchasing power of many Nigerians. The currency devaluation of the naira against major foreign currencies has further driven up the cost of imported goods, making everyday items more expensive.
Additionally, the removal of fuel subsidies, a policy intended to reduce government expenditure, has had unintended consequences, leading to a sharp increase in fuel prices. This, in turn, has escalated transportation costs, directly impacting the prices of food and other essential commodities.
As a result, millions of Nigerians are finding it increasingly difficult to afford necessities, forcing them to adjust their spending habits, seek alternative income sources, and adopt survival strategies to cope with the worsening economic conditions.
To navigate these difficult economic conditions, Nigerians can adopt several practical strategies to mitigate the impact of rising costs. Below are ten ways individuals and families can manage their finances effectively during this period:
Prioritise essential spending
One of the most crucial survival strategies in times of economic hardship is focusing on essential needs such as food, housing, healthcare, and education. Families must differentiate between necessities and luxuries to allocate their limited resources more effectively. This means cutting down on non-essential expenses such as frequent dining out, entertainment subscriptions, and luxury purchases. By doing so, households can ensure that fundamental needs are met before considering discretionary spending.
In addition, purchasing in bulk from wholesale markets, leveraging discounts, and seeking out cheaper alternatives for necessary goods can significantly lower expenses. Financial discipline is key to weathering economic turbulence, and this begins with a strong focus on essential spending.
Create and stick to budget
Budgeting is a crucial financial tool that allows individuals to track their income and expenses, helping to identify areas where costs can be minimised. By creating a detailed monthly budget, individuals can prioritise their spending, ensuring that funds are allocated efficiently toward essential expenses and savings. This proactive approach not only helps in avoiding impulse purchases but also aids in managing debt and building long-term financial security.
Regularly reviewing and updating the budget is vital for staying on top of any changes in income or spending habits. Households should assess their financial situation periodically to make necessary adjustments, ensuring that their budget remains aligned with current needs and goals. Whether through digital budgeting apps, spreadsheets, or traditional methods like pen and paper, having a tool to track finances is key to maintaining a clear and realistic view of one’s financial health. A well-planned budget not only keeps overspending in check but also empowers individuals to make informed decisions that support their financial well-being and future aspirations.
Embrace alternative energy sources
With the removal of fuel subsidies leading to higher petrol prices, many Nigerians are struggling to manage the increased cost of transportation and energy. One effective way to mitigate this burden is by embracing alternative energy sources such as solar power and compressed natural gas.
The Nigerian government has introduced programmes to encourage vehicle owners to convert their petrol-powered vehicles to run on CNG, which is cheaper and more environmentally friendly. Similarly, investing in solar panels for home electricity can help reduce reliance on costly generators, ultimately saving money in the long run.
Join cooperative societies
Cooperative societies play a vital role in providing financial relief and economic support to members. By pooling resources together, members can access loans at lower interest rates, benefit from bulk purchasing of essential goods, and receive financial assistance during tough times.
Many cooperatives also provide savings and investment opportunities, helping individuals grow their finances. Engaging in these societies allows members to maximize financial opportunities while minimising the economic burden of rising costs.
Explore urban farming
Food inflation is one of the biggest contributors to the rising cost of living in Nigeria. As a result, engaging in small-scale urban farming can help households supplement their food supply, reducing dependence on expensive market purchases.
Growing vegetables, rearing poultry, and cultivating staple crops in home gardens or small urban spaces can provide a steady source of nutrition while cutting down on grocery expenses. Additionally, any surplus produce can be sold, creating an extra stream of income.
Utilise public transportation
Transportation costs have skyrocketed in Nigeria due to high fuel prices, making it necessary to explore cheaper commuting options. One effective strategy is switching to public transportation instead of using private vehicles, which incur significant fuel and maintenance expenses.
Additionally, carpooling with colleagues, neighbours, or family members can help spread transportation costs among multiple people, ultimately saving money. Public transport options such as Bus Rapid Transit and train services are also more affordable alternatives to private car ownership.
Seek additional income streams
With rising costs and stagnant wages, relying on a single source of income may no longer be sufficient. Diversifying income sources can help individuals achieve financial stability by providing a financial cushion against the increasing cost of living.
Engaging in freelance work, taking up part-time jobs, monetising skills, or venturing into small-scale businesses can generate extra income. The rise of digital platforms has also opened up opportunities in e-commerce, online tutoring, content creation, and remote jobs, providing alternative ways to earn money.
Practice energy efficiency
With rising electricity tariffs and high fuel prices, conserving energy has become essential for managing household expenses. Implementing simple energy-saving habits can significantly lower utility bills. Using energy-efficient bulbs instead of luminous ones, turning off electrical appliances when not in use, and opting for gas cookers over electric ones can all help reduce energy consumption. Additionally, investing in solar-powered devices can lessen dependence on electricity. By adopting these measures, households can effectively cut down on energy costs and save money over time.
Participate in community support programmes
Several community-based support programmes exist to help individuals cope with economic hardships. These initiatives, run by religious groups, non-governmental organisations, and government agencies, provide relief through food banks, subsidised healthcare, educational scholarships, and financial assistance.
Many Nigerian communities have established local support networks that provide essential commodities at discounted rates. Taking advantage of these programmes can help cushion the effects of rising living costs, especially for low-income earners.
Stay updated and flexible
Financial literacy and awareness are essential tools for surviving economic challenges. Keeping abreast of economic policies, market trends, and government initiatives enables individuals to make informed financial decisions.
For example, understanding new tax regulations, government intervention programmes, and investment opportunities can help individuals take advantage of economic policies that may ease financial burdens. Being adaptable and open to changing spending habits in response to economic conditions is key to achieving financial resilience.
Reduce your eating out
Research indicates that cooking at home is more cost-effective than dining out. A good three-course dinner can be made at home for the same price as a meal at a typical restaurant. You’ll be shocked at how much you can save in a month if you stop eating at restaurants and ordering takeout.
Strike a deal on lower prices
By haggling over the cost of items or services until a price is reached that both parties can agree on, you can lower daily spending. The overall monthly spending would be impacted if you consistently obtained items and services at reduced prices.
Put off non-emergency needs
It’s not necessarily going to be more expensive. In the event that a price increase is only temporary, it might be wise to wait since the price may eventually drop. You can postpone purchases that are not urgently needed, and you might be able to find a better offer later.
Profit from your savings
When inflation occurs, the value of money often declines as a result of an abrupt rise in commodity prices. You can lessen the damaging impacts of inflation by placing your money in a savings account with a high interest return, where it will earn more interest.
Conclusion
The rising cost of goods and services in Nigeria has placed a significant burden on households, making financial management more crucial than ever. However, by implementing practical strategies such as prioritising essential spending, budgeting effectively, embracing alternative energy, engaging in cooperative societies, urban farming, and exploring additional income streams, Nigerians can navigate these economic challenges more effectively.
While the government continues to explore solutions to stabilise the economy, individuals must take proactive steps to ensure financial sustainability. By staying informed, being adaptable, and leveraging available resources, Nigerians can mitigate the impact of rising costs and maintain financial stability during these challenging times.
