Making 2013 Count – The Nigerian Middle Class
Various findings on Nigeria’s middle class are as follows: average monthly income is in the range of 75 to 100 thousand naira or roughly 6000-7000 dollars per annum; well educated of which 92 per cent have obtained post-secondary education or have studied at an institution of higher learning; a sizeable proportion of those sampled (76 per cent) work in the public sector; hunger for knowledge and top priority on good education for their children; with over half (upper and middle class citizens) keen to send their children abroad for a better quality of education.
The middle class has a culture of savings and care little about the deposit rate and do not expect to borrow from a bank. If they had the funds, they would rather invest in land/property than shares or bonds. Most do not have mortgages (which represents approximately 1 per cent of GDP) or credit cards, although many expect to apply for the latter.
Projections about Nigeria’s economy indicate its economic growth exceeding that of South Africa for the foreseeable future and it’s now up to the government in Nigeria to ensure the sustainability of such.
Abhijit Banerjee and Esther Duflo, two economists known for their work with the poor, define the middle class as households whose daily per capita expenditures valued at purchasing power parity are between $2 and $4, and those between $6 and $10, located in rural and urban areas.
Economists wonder if Nigeria’s floating middle class will trade up in 2013 – that is, from subsistence consumers to middle class. Will an army of entrepreneurs emerge from the middle class to create employment in urban Nigeria? They will have to come from Nigeria’s young and economically active age group of 18 to 65 years old. Their emergence depends on values: human capital accumulation (knowledge) and savings (frugality).
In Nigeria, consumer-facing companies will benefit the most as Nigerian households, inflation and inclusive growth permitting, increase the share of their budget spent on food, entertainment, e.g., television, education and cement. Such companies, using proprietary research gleaned from their supply chain and network of distributors, are tailoring their products to suit the pockets of consumers. For instance, products of Consolidated Breweries are priced so that consumers can “trade up from ‘home’ brews and cheap spirits (shots) to real beer”.
However, the number of people that will trade up will grow if the middle class in rural or urban areas can get jobs or capital to start or sustain a business. Banerjee and Duflo reckon that “getting something without a large resource commitment appears to infuse most businesses of the middle class… businesses might be less an engine of growth than a means of sustenance, a way of ‘buying a job’.”
In other words, middle class family businesses do not grow, because it is not the priority of the owners (the business is an extra source of petty cash); human capital investments – the best education and healthcare – are more important. Thus formal employment with social safety nets may be the way to job security.
Nigeria can avoid what Pat Utomi calls “a self-inflicted meltdown” if the policies are targeted at promoting industry-oriented technical skills alongside light manufacturing companies in Export Processing Zones to complement agriculture produce clusters across the country.