Nigeria is currently grappling with harsh economic conditions caused largely by bad governance, policy inconsistency, poor monetary and fiscal policy and the negative effect of the COVID-19 pandemic.
All major economic indicators that define a nation’s growth trajectory are currently in the negative with little or no end in sight.
The price of food items, commodities, transport and essential services have skyrocketed as Nigeria’s inflation rate hits 18.6%, the highest in more than five years. According to official figures from the National Bureau of Statistics (NBS), 33.3% of Nigerians are unemployed representing over 66 million of the population. The value of the Naira is on a free fall pegging at N670 to the Dollar in the parallel market, while the official rate stands at N415 to the dollar. According to figures from the World Poverty Clock, over 83 million Nigerians live in poverty, representing 39% of the total population.
Many Nigerians are struggling to deal with these harsh economic conditions and the uncertainties that lie ahead.
Like any problem, financial stress can have a big impact on your mental and physical health. It can increase your risk of depression and anxiety, make you feel angry and ashamed and even affect the healthy relationship you have with others. You may end up drinking alcohol, taking drugs, or gambling to try to escape such worries. In worst-case scenarios, it can even create suicidal thoughts. Financial stress affects your quality of life.
However, as a Nigerian, you can handle this financial stress by implementing some tactics which will help you manage your resources, especially money in the best possible way, such that you will not be overwhelmed by the continuous increase in the cost of living.
Here are a few steps you can take to ensure that you become financially resilient and even bounce back from hardship.
1. Devise a Budget:
Do your best to draw a budget that will serve as a guide to expenditure. A budget generally gives a view of items you need. Looking at the current economic conditions, your budget must focus on things you cannot do without. Such items may include rent, foodstuffs, medicine, transportation, basic utility and so on. The list may be different among individuals but the key thing to note is that the budget must focus on NEEDS and not WANTS. The 50/30/20 budget method offers a great guide. It simply means:
-50% of your fixed or net income goes towards living essentials such as rent, utilities, groceries and transport.
-30% is assigned to discretionary expenses, such as clothes or recreational activities for yourself or kids if you have any.
-20% allocated towards the future. This includes saving for retirement, paying down debt, and emergencies.
2. Reduce Your Current Expenses:
Consider focusing on ways you can cut expenses and divert funds into your emergency savings; or where likely, fund your basic needs due to inflation.
Common examples may include reducing the number of times you decide to dine or party out, downsizing or putting an end to impulse purchases, deferring your subscriptions or streaming services, finding a lower-cost data plan, etc. This habit can free up extra cash which may likely go a long way to reducing your financial stress.
3. Create An Emergency Fund And Have A Reasonable Amount Of Money In There
One painful experience to have in this current hardship is to face unexpected expenses without setting aside an emergency fund.
The future cannot be predicted entirely, however, the money you have in a fund could cushion you against any unexpected financial crisis you are likely to face. Always remember to keep this money for an unforeseen emergency.
4. Limit Borrowing And Reduce Debt To The Barest Minimum
Maintain a low debt-to-income ratio. Do not borrow so much against your disposable income. Borrowing so much against your disposable income reduces the amount of cash available for you to take care of your basic needs and emergency savings. Considering the current interest on loans, the probability of defaulting in servicing loans you take is very high. You may end up paying penalties in addition to principal and interest because of defaults and this is going to increase your financial woes.
In simple terms, do not borrow more than you cannot conveniently pay. The current economic condition is not conducive for anyone to use the fund to manage his/her personal, family, or domestic upkeep.
As you assess your debt and spending habits, remember that anyone can get into financial difficulties, especially at times like this. Do not use this as an excuse to punish yourself for any perceived financial mistakes. Give yourself a tap on the back because watching this alone shows how strong you are not to give up in these challenging times as a Nigerian.
All hope is not lost, just stay focused on the aspects you can control as we look forward to better days ahead.
