KASI consumer confidence index rose slightly in June by 2 points driven by optimism on the future prospect of the economy. The index of consumer expectations rose 3 points to +25 from +22 in May.
Job prospects sub-index hurt by high unemployment amplified by COVID-19.
The drop in consumer sentiment for the national economy aligns with World Bank recession prediction.
The KASI consumer confidence index (KASI CCI) score for Nigeria saw a +2 point increase in the month of June from +6 to +8. This is a small sign that the comprehensive consumer sentiment is improving after the low numbers recorded during Nigeria’s COVID lockdown in April. The modest upward growth was due to an increase in consumer expectations from +22 to +25 while Nigerian sentiment on current conditions remained the same as May at -33. It isn’t surprising to see the current conditions index at a level way below the consumer expectations because Nigeria has the third-largest number of cases in Africa, with more than 40,500 infections on July 27. Additionally, KASI COVID Pulse data shows that 53% of Nigerian respondents believe it will be 3-4 months before their lives return to normal. This may likely turn out to be an optimistic estimate.
ICS data from 2016 to 2020
The challenging job market, coupled with COVID-19, continues to dampen consumer confidence
The job prospects sub-index decreased by 7 points to -67 this month which was a contributing factor to the moderate increase in consumer confidence. The challenging job market is amplified by the pandemic and the high levels of unemployment that have ensued. In June alone 75% of KASI respondents reported finding a job to be more difficult because of the virus. This is the highest result recorded since the beginning of the pandemic. Nigeria regularly deals with a high unemployment rate which was demonstrated in the last available National Bureau of Statistics report relaying a rate of 23.1% unemployment for the third quarter of 2018. A statement made by the Minister of Labour and Employment in 2019 had already indicated the expectation for a significant unemployment increase by 2020, predicting a rate of 33.5%. COVID-19 has worsened this already negative outlook. Nigeria’s current Vice President, Yemi Osinbaio, who also chairs Nigeria’s Economic Sustainability Committee, recently communicated the government’s forecast of almost 40 million jobs disappearing by the end of this year. This is especially of concern for Nigeria’s youthful population.
Consumer sentiment level contributes to the belief that Nigeria’s next recession is close
Despite the slight increase in June, consumer confidence is hovering around zero, and compare to other countries, is signaling an imminent recession. It is not surprising given the recent warnings from the World Bank that said Nigeria is headed for a recession because of COVID, low oil prices, and weak economic activity. As discussed previously, oil prices have taken a drastic hit during the pandemic and the commodity makes up 80% of Nigeria’s exports and almost 50% of government revenue. Finance Minister Zainab Ahmed, previously announced a revision to the oil price forecast in the government’s budget down from $57 to $30. Recently, Minister Ahmed announced another amendment down to $20 was in the works. For these reasons, the low oil prices have been a significant input in the World Bank’s estimates that Nigeria will be facing its worst recession in the last 40 years with a contraction of 3.2% projected for 2020. This is troubling news for Nigeria’s recovery effort and prevention methods for COVID-19.
Consumer-facing companies and retailers should expect a choppy demand and a challenging environment in the short to medium term
COVID-19 is definitely having an impact on consumer confidence and we have seen significant volatility month over month and wide variation amongst the countries that we track. For retailers and consumer-facing companies, it means that consumer demand and sales are going to be difficult to predict and previous years' data won't cut it. The impact of COVID-19 on people's daily lives and shopping habits is so severe that it is critical to get a pulse on the consumer and markets every month. Our COVID-19 Pulse data shows major shifts in category demand pre and post COVID-19 as well as during the pandemic.
By Emma Borhi, Economic Intelligence Group at KASI.
About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions.
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