Income cankerworm pulls Nigerians towards extreme poverty line
If your income has not doubled within the last seven years, then you have every reason to worry as you may soon be caught up in extreme poverty flood currently drowning 91 million Nigerians, according to the World Poverty Clock.
A Brookings Institute report published this year showed six Nigerians fall into extreme poverty in one minute, you can imagine the number of new entrants before you finish reading this article.
As worrisome as that could be, the next batch of Nigerians may not even be aware that they are on their way to living below $1.90 a day, this owes to the fact that a steady pay raise or income would most likely obscure any unsuspecting employee or entrepreneur.
Whilst a higher income excites the mind, a cankerworm is right beneath eating the value at a blistering rate of which only discerning individuals can see, and that is inflation.
In the last seven years, Nigeria’s inflation rate has grown more than double but some people’s income has only risen by 50 percent, some 20 percent, while some other probably remained unchanged.
Here is how it works, the amount you earn perhaps on a monthly basis is in nominal terms, but the real value of the money can be obtained by adjusting for inflation.
According to the National Bureau of Statistics (NBS), the Consumer Price Index (CPI), which measures the composite changes in the prices of consumer goods and services purchased by households over a period, was 132.6 as of March 2012.
The statistics bureau put the index at 280.8 as at March 2019, implying that if you earned N70,000 in March 2012, you would need to earn N148,235 in March 2019 to buy exactly the same quantity of goods and services you bought seven years ago, else you may soon be a new entrant into extreme poverty kingdom.
As inflation worsens, so is your purchasing power, this explains why N100 could buy two packs of sachet water years back but the same amount would not even buy one today.
Also, with N2, 000 you could be sure of getting 23 litres of premium motor spirit, otherwise known as petrol, in 2012 while the same amount can only buy less than 14 litres today. The purchasing power of N70,000 in March 2013 was N52,790, if remained unchanged, that would weaken to N24,928 in the same period in 2019.
These amounts can be obtained by dividing the nominal income value by the corresponding CPI figure and multiplying all by 100. The CPI measures the nation’s inflation rate.
With all this in mind, you can begin to set new income standards for yourself through constant evaluation to know if your income is increasing faster than the nation’s inflation.
That would help you in salary negotiations while seeking for a new job (even though the value you are bringing to the table would play a major role here) or inform new strategies to spur sales in your business and ultimately translate to increased net income for you, as this is the only escape route from being flooded by extreme poverty.