Too Much Money: The Real Reason South Africans Are Broke

It’s strangely paradoxical, but the truth is this: the reason your money doesn’t stretch is because there is too much money floating around in the system.

Photo by Sara Kurfeß on Unsplash

In Nigeria today, the phrase “money no dey” has practically become a national anthem. People are noticeably poorer than they were not too long ago, and the number of individuals who describe themselves as “broke” has surged. For many workers, their salary disappears the moment they pay for basic needs like food, utilities, and transportation. Debt has become a survival tool: countless Nigerians now rely on loan apps, or borrow constantly from relatives and friends, just to get through the month. What makes it worse is that some salaries are swallowed entirely by repayments from loans taken earlier, trapping them in a cycle that restarts every payday.

Nigeria has never been a wealthy country in the global sense, but the situation was nowhere near this dire fifteen years back. A monthly income of ₦150,000 in 2014 could cover living expenses and still leave some savings. I know someone who earned exactly that and managed, with about a year of disciplined saving, to buy a fairly used 2008 Toyota Matrix. Fast-forward to today – less than two decades later – and more than half of that same amount cannot even keep the same car fuelled for a single month. Add the rising prices of food, rent, electricity, and everything else, and it becomes obvious why people feel crushed financially.

Don’t assume wages have kept pace with these costs. They haven’t. The national minimum wage currently stands at ₦70,000, and an alarming share of Nigerians earn little more than that. Unsurprisingly, many people now think the answer is to raise the minimum wage again, without questioning the underlying forces that keep eroding their purchasing power.

They mystery of inflation

It’s strangely paradoxical, but the truth is this: the reason your money doesn’t stretch is because there is too much money floating around in the system.

Droughts in South Africa caused shortages of food, and that pushed up prices^[i]. If fewer people had been buying food during that period, prices might not have risen. But demand stayed the same, and in some places even increased because people were afraid of running out. When more people want the same amount of goods, prices rise. A drop in supply is not the only reason things get more expensive. Even if supply stays flat, higher demand alone can push prices upward.

Central banks make this worse. In their attempt to “support growth,” “use idle resources,” or avoid slight drops in prices, they create large amounts of new money that never existed before. With this new money, governments pay contractors, hire workers, and launch various projects. Once the contractors receive the money, they buy materials and hire labour. But these workers and resources could have been used by private businesses that are usually more productive. This extra demand for labour and materials forces their prices up. As those costs rise, the prices of everyday goods and services rise too. That is the basic chain: when the money supply grows far faster than the real economy, the cost of almost everything goes up.

Why you’re always broke?

Why do people feel broke all the time? They do because while the government keeps expanding the money supply, wages rise much more slowly. Salaries remain almost the same, but the price of nearly everything else climbs higher. That R5,000 that once covered a month’s needs now stretches far less than it did ten years ago. In Nigeria, the same ₦150,000 that once lasted a month can’t do so anymore. It’s not a mystery. Your money loses strength before you even use it. The notes look the same, but they command less each year. More money in circulation doesn’t create more wealth; it just spreads existing wealth thinner. Sadly, many people call for minimum-wage hikes as the cure, not realising that past wage mandates sometimes contributed to the very money expansion that weakened their earnings in the first place.

What’s the solution?

The solution is straightforward. Stop expanding the money supply. Once the flow of new money slows down or stops, prices stabilise and the cost-of-living falls. When money holds its value, living standards rise because people keep more of their purchasing power instead of watching it drain away.

Econ Bro (@EconBreau and @EconBreau2 on Twitter/X) is a Nigerian Austrolibertarian economist and an apprentice at the Mises Institute. Under the organisation name “The Freedom Institute” he teaches individual liberty, personal responsibility, private property rights, free markets, and sound money to mostly young people across Nigeria. Econ Bro is an Associate of the Free Market Foundation.

---

[i] https://www.weforum.org/stories/2015/09/why-are-south-africas-food-prices-rising/