How to Budget Effectively in Nigeria’s Current Economy

In present day in Nigeria, what we have is that budgeting has become a survival skill, and not just a financial practice. We see inflation rise, fuel prices fluctuate, food costs, which are unpredictable, and the naira, which is weak. What, which used to suffice a few years ago, doesn’t even cover basic expenses now. What used to be put in the past is that budgeting is about being tight and restrictive, which is not the case; now it is about intentional spending, which puts you in control of your money instead of the other way around.

In present economic times of Nigeria, which is what we are in, the first thing to do is to take a look at your financial situation. Many people steer clear of this issue, which is often a painful process. But to budget at all is to be honest with yourself. You must know what you are bringing in, that is: do you have a set salary, are you into a business which gives you variable income, or do you have many small-scale incomes. Also, once you have that out of the way, you must look at what you are putting out. This means to track your monthly expenses. Some people are surprised to see how much they are spending on transport, data, food delivery, or that which may seem like a little something each day, which in actual fact adds up.

A good starting point is to make out a list of your monthly expenses. This list should include rent, electricity, water, transport, food, internet, school fees, if they apply, health care, and also any debt payments. Also, it is important to put needs at the top of your list and wants at the bottom. Needs are items you truly can’t do without, which include food, shelter, and basic transport. Wants are for comfort and pleasure, which, although nice, are not essential, like eating out frequently, buying expensive clothes, or premium entertainment. In Nigeria’s economy at present, priority of needs over wants is the most important budgeting principle.

After identifying your expenses, you will then go about putting forth your income into different categories, that which goes into which. A very popular budgeting tip is the 50-30-20 rule that says put 50% of what you make into what you need, 30% into what you want, and 20% into savings or investment. But in our case in Nigeria, which has high cost of living, this rule doesn’t always play out that way. Many spend over 50% of they’re income on basic needs alone. In which case, we may have to do away with that rule instead of getting rid of budgeting all together. You can aim at 60% needs and 20% each for wants and savings, or 70% for needs, 15% each for wants and savings; what works best for you will depend on your own set of issues.

Saving is a key element in good budgeting at any time, but especially in a tough economy. Some people present the case that in Nigeria it is hard to save, what with all the high prices. While that is a valid point, what we put away does not have to be large sums. Even small and regular savings add up over time. The main thing is to put your money into savings before you put it towards anything else. This means, out of your income, the first thing you do is to put aside for savings before you pay bills or buy things. Also, this approach breaks the tendency we have to only save what is left over at the end of the month, which, by that time, is usually nothing.

In the Nigerian context, which is very large in scale, we see that a great component of budgeting goes into the preparation for emergencies. Life is unpredictable, and we see that the unexpected is a regular feature. Illness, car issues, family demands, or the loss of a job can disrupt even the best laid out budgets. That is which is why we have an emergency fund, which is very much a priority. Also, such a fund should cover from 3 to 6 months of basic living costs. Although this may be hard, also for the low-income groups, to do at first, we see that the growth of an emergency fund is better than having nothing at all.

Transportation is a large issue for most Nigerians, which in particular includes urban dwellers in cities like Lagos, Abuja, and Port Harcourt. Fuel and transport prices are very volatile, which in turn affects what we spend each month. To better control your budget, we recommend that you put a plan in place for your transport costs, which you can do by looking at your weekly routine and then reducing where you can. This may mean you share a car with colleagues, use public transit when you can, or work from home if that is an option for you. Even small changes to your commute can have a large impact on your total budget.

Food is also a large component, which we must plan out. In recent years, food prices in Nigeria have gone up greatly, which in turn affects home-cooked meals as well as dining out. Also, a great tip is to plan your meals out. Instead of random purchases or frequent dining out, what you can do is plan what you will be eating for the week, make a shopping list, and stick to it. Buy in bulk, shop at local markets, which are less expensive than the large supermarkets, and cook at home more often. Also, reduce food waste by proper storage of leftovers and use of all ingredients, which will in turn stretch your budget.

Debt management is an integral part of budgeting. In Nigeria, we see many that rely on loans, credit, or buy now, pay later options to cover their expenses. While these may be a solution in a pinch, what we also see is that they may get you into a never-ending debt cycle without careful management. If you do have existing debts, which you are dealing with, your budget should present a clear plan of action for repayment. Also, out of that plan, pay off high-interest debts first, that which has the ability to grow into an unmanageable amount very quickly. Also, at the same time, try to avoid taking out new loans when at all possible.

Budgeting also requires willpower and self-control. It is simple to make a budget, which looks good on paper, but in real life it is much harder to stick to it. Social influence, advertising, and comparison to others’ lifestyles can pull you into spending beyond what you can afford. In Nigeria, which is a very status- and image-conscious society, many people are put in a position to live beyond their means. What effective budgeting does is to teach you to say no to non-essential expenses and to think of the future financial health instead of immediate pleasure.

Technology is a great asset in budgeting. We have a variety of budgeting apps, spreadsheets, and even basic notes on your phone, which may help you out in tracking your income and expenses. Also, if you are not into tech, that’s no issue at all; a good old-fashioned notebook works great for writing down what you spend. What is key is consistency. By reviewing your budget at weekly or monthly intervals, you are able to tell what is working and what is not.

Another key strategy is putting in what it takes to increase your income. Budgeting does not only focus on cutting costs but also on improving your financial health. In Nigeria’s rough economic climate, that is, it is in the best interest of many to not put all eggs in one basket with income sources. Many people look to side businesses, freelancing, the internet, or part-time jobs in addition to their regular income. Also, that which may be little extra money from another source goes a long way in better budget performance and achievement of your financial goals.

It also, in that which puts into account personal growth and future goals. This includes education, skill development, or career advancement. We put out money into ourselves, which at times may require that we spend now, but in the end it pays off in better job opportunities and higher income. Also, we must put aside for long-term goals such as starting a business, buying land, or saving for retirement, which at time means we have to sacrifice in the present.

In many families in Nigeria, budgeting is a large issue. It is very much the culture to support parents, siblings, and extended family. This is a great thing but also puts a strain on personal finances. For effective budgeting to work, you have to set boundaries and be realistic about what you are able to give, without which you risk financial distress. Also, very important is to have open communication with family members regarding your financial situation, which in turn helps to manage expectations.

Inflation is a large issue in present-day Nigerian budgeting. We see price changes very often, which in turn makes it hard to keep to a set budget. To that end, your budget should be flexible as opposed to rigid. Instead of putting in exact figures for each category, try out a range, and which you may adjust as you go. For instance, you may put in a range for food instead of a set amount, which in turn will allow you to adjust to price changes.

Finally, budgeting is a practice that you engage in for the long term, not a single event. It requires patience, consistency, and an open mind to learning from what goes wrong. You may not see immediate results in the first go, which is ok. The goal is to improve over time, not to be perfect right out of the gate. With time, effective budgeting may reduce your financial stress, help you achieve what you want to achieve, and give you a greater say in how your life plays out in Nigeria’s unpredictable economy.

In a word, in Nigeria’s present economic state, we are at a budgeting crossroads, which is at once very hard and very important. By which we mean to say that you must know your income and outgoings, put priorities where they belong, save a regular amount, manage debt, plan for the emergency fund, and, in all that which is to say, be disciplined with your spend. Also, although the economy may be a moving target, a solid budget plan can give you that which you need: stability, clarity, and peace of mind in the midst of that which is uncertain.