Lagos Still Among World’s Costliest Cities

MAUREEN AZUH writes on a new survey that classifies Lagos as one of the 50 most expensive cities in the world

As the biggest commercial centre of Nigeria, Lagos, has always been in the limelight. Before now various Internet sources had indicated that Lagos is the second fastest growing city in Africa and the seventh fastest in the world.

A recent survey by Mercer, a global outsourcing and consulting firm, has also ranked Lagos among the 50 most expensive cities of the world for expatriates. The survey, tagged World Cost of Living Survey 2012, covered 124 cities across five continents and placed Lagos at the 39th position, two steps up from the 41st position it occupied last year.

According to the report, published online, the survey was based on measures of the comparative cost of 200 items in each of the surveyed country. The items included transport, food, clothing, household goods and entertainment.

Housing cost, regarded as constituting the biggest expense for expatriates, also played an important role in determining the ranking of cities. The survey is designed to help multinational companies and governments to determine compensation allowances for their expatriates. While New York is used as the base city against which all other cities are compared, currency movements are measured against the US dollar.

The report of the survey, however, states that recent world events, including economic and political upheavals, have affected the rankings for many regions through currency fluctuations, inflation, and volatility in accommodation prices.

A principal at Mercer, Nathalie Constantin-Métral, who is responsible for compiling the ranking each year, explains the rationale behind the survey.

She said, “Deploying expatriate employees is becoming an increasingly important aspect of multinational companies’ business strategy, including expansion. But with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including on expatriate remuneration packages. Making sure salaries adequately reflect the difference in cost of living to the employee’s home country is important in order to attract and retain the right talent where companies need them.

“When compared to New York, our benchmark city, most European cities, have witnessed a decline in cost of living. Some exceptions exist where accommodation prices have increased or additional VAT taxes have pushed the cost of living up. In North America, most cities have gone up in the ranking, as the US dollar has strengthened against a large proportion of the world’s other currencies. In Asia, more than six in 10 cities moved up in the rankings, including all surveyed cities in Australia, China, Japan and New Zealand. Cities in Australia and New Zealand witnessed some of the biggest jumps, as their currencies strengthened significantly against the US dollar.”

In the 2012 survey, Tokyo ranked as the world’s most expensive city for expatriates while Karachi, India which did not make the top 50, is the cheapest. Tokyo pushed Luanda, Angola to the second position while Osaka — also — in Japan came third, leaping three places up from last year when it ranked sixth.

In the United Kingdom, London — at number 25 on the list — is the most expensive city for expatriates, down seven places from last year where it ranked 18th. Birmingham did not make the top 50 but ranked 133, up 17 places from last year, having overtaken Aberdeen at 144 and Glasgow at 161. UK’s least expensive is Belfast at 165, up 13 places in the ranking in 2011.

Most European cities dropped on the ranking, a situation that has been attributed to weakening of local currencies, including the euro, against the US dollar. Oslo, Norway at 18 is down three places from 2011 while at 28th position; St. Petersburg is up one place. Paris, ranking 37 is down 10 places, while Milan (38), Rome (42), Stockholm (46), Vienna (48) and Amsterdam (57) are all down from seven to 13 places. Helsinki at 65 and Prague, 69 on the ranking have both slid down the list, 23 and 22 places respectively. Brussels at 71 dropped nine places, followed by Dublin — 72 — down 14 places. Skopje, Macedonia at 207 is the least expensive city for expatriates in Europe.

Constantin-Métral said that unstable economic situation across Europe might have contributed to the drop of European cities on the ranking.

“Despite some marked price increases across the region in the first half of last year and widespread increases in VAT charges, most European cities dropped in the ranking. This is mainly due to the unstable economic situation across Europe, which has led to the depreciation of most local currencies against the US dollar. Countries badly hit by the Eurozone crisis, including Greece, Italy and Spain, have also experienced drops in rental accommodation prices,” she said.

In Africa, despite dropping off the top, which it occupied on the list in 2011, Luanda, Angola, now coming second, remains the highest ranking city in Africa. It is reputed as the most expensive for expatriates. Ndjamena, Chad at eight, follows, dropping five places from its third position in 2011. Dropping eight places, Libreville, Gabon at 20, is the next African city on the list, followed by Khartoum, Sudan at 26 up 18 places from last year.

Johannesburg, South Africa ranked 154 and Cape Town 179 — falling 23 and 21 places respectively, “reflecting the considerable weakening the South African rand has suffered against the US dollar in the last year.” Tunis, Tunisia remains the least expensive for expatriates in the region at 209 on the ranking, two places down from last year.

Constantin-Métral said the main reason behind having 20 African cities on the top was the difficulty in finding good, secure accommodation for expatriates. According to her, the limited supply of acceptable accommodation is very expensive and the cost of imported international goods is also high, contributing to too many regional cities moving up the ranking.

Cities in South America were also rated high on the ranking with São Paulo and Rio de Janeiro at 12 and 13 positions respectively, making them the most expensive cities for expatriates across both North and South America. Constantin-Métral noted that “Inflation pressures continued to push some South American cities up the ranking, whereas for some of the region’s cities, weakening of the local currencies caused them to rank lower.”

The survey, conducted recently from exchange rates, is used “by governments and major companies to protect the purchasing power of their employees when transferred abroad”.