Nominal income stagnant; real income falling

By Ola Agbetokun

Ola Agbetokun

Salary is a form of income earned by those not working for their own business like civil servants, public servants, corporate managers and so on. Those working in the informal sector by engaging themselves in their own businesses also earn income.

To the latter, the former are not suffering from the harsh economic conditions in Nigeria right now but that cannot be true! Nominal income is the volume of money earned by an individual at a specified interval of time (say N50,000) per month.

On the other hand, real income is the quantity of given commodities the volume of money can buy at a given period of time, given their prices (say 10 bags of rice from N50,000 when the price of a bag is N5000).

Now that a bag is N13,000, a person collecting N50,000 as salary can only afford 3 bags from his constant nominal income. This person's real income has fallen by 70%, what a hell! Most people are not conscious of this devastating setback since it is not directly affecting the nominal income.

If the government cuts salary of N50,000 by 70%, it means the earner goes home with N15,000! Can this be acceptable, NO. But that is exactly what is happening now with skyrocketing prices of commodities in the consumption baskets of salary earners.

Now do this calculation and tell us if you are worse off or better off in the last 6 months.

Majority of non-salary earners think salary earners are not suffering and as such they should not demand for salary increase. The government spends through salary earners as the Central Bank doesn't print and share money to individual homes. 

So, the suffering of salary earners has direct effects on nonsalaried people. As it stands, do you think Nigerians should demand for increment in salary or price stability?