Nigerian retailers have raised concerns over the increasing challenges they face in restocking their shelves, blaming this on foreign exchange instability and high inflation rates nationwide.
Nigeria’s inflation rate has been rising, as the cost of commodities across the country has continued to increase.
In August 2024, Nigeria’s core inflation rate reached 27.60 per cent, the highest ever recorded, with food inflation at 37.52 per cent year-over-year. The overall inflation rate for August 2024 was 32.15 per cent year-over-year.
Also, the country’s local currency has been crashing against the United States dollar, trading at around N1,650/$ in recent weeks.
The Director of the Nigerian Association of Small and Medium Enterprises, Eke Ubiji, said the inflation has reduced consumers’ purchasing power, a development that has made malls, superstores, and convenience store owners struggle to restock.
Ubiji said retail businesses were forced to choose between maintaining quality and restocking, which was unsustainable for many.
“Business owners want to maintain their place in the market space. How do you maintain your space in the marketplace? You are selling quality products; well packaged, well preserved, and possibly at a price that is within the reach of your customers.
“If the price goes too far, your customers will be discouraged from buying those products from you, and your hold on the market will be reduced,” he explained.
The NASME director noted that businesses needed government intervention to overcome low sales, saying, “It is a tough one. That is where the government needs to come in to see how far this could be stabilised.
“If you are running an economy and the people—the producers, the buyers are all shying away, then there’s a problem that the government has to find a way to address,” he continued.
Ubiji observed that retailers’ inability to restock as they did in 2023 was why multinationals that produced and sold to the Nigerian market either packed up and left or scaled back their operations.
He said, “International companies producing and selling here could not keep up with the pace and survive. That is why they closed up. They close up and leave. And if they leave, there is something one may have been looking for in the market for a long time now but can’t find it because the company has left.”
Findings revealed that retailers faced restocking challenges, including inflation, naira depreciation, and high energy costs, which significantly impacted companies’ operational expenses.
Firms like Cadbury Nigeria, BUA Foods, and Unilever experienced sharp increases in their operating costs, with Cadbury reporting a 23.7 per cent rise in operating expenses.
The Manager of Cherit Foods & Supermart in Lagos, Chioma Madunago, spoke of difficulties retailers were facing as sales dropped, noting that she could not frequently restock her store as she did the previous year.
Madunago said, “Last year, we made a lot of sales, unlike this expensive year. By this time last year, you would have seen more than two to four people attending to someone. But this time around, the sales here are very poor.”
She explained that her business, which she ran with her family, maintained a balance between product quality and keeping customers.
“We have been maintaining our old products because most customers prefer what they are already used to. We would rather buy what customers will get than go for the cheaper one.
“We restock back what we already have and rather increase the price according to the market price because we find that there are some certain goods we change and most of them will come and say this thing is too cheap. So, they will say no and dump it,” she added.
Another provision store owner, Zara of Zara Stores, echoed Madunago’s sentiment and explained that prices of goods moved higher by the day.
“Restocking has been tough. We buy based on demand now,” Zara said. “Before, customers bought drinks and snacks in bulk, but now, they are buying in smaller quantities. The prices keep going up, and people just can’t afford to buy the way they used to.”
According to an economist and former President of the Chartered Institute of Banking of Nigeria, Prof. Segun Ajibola, retailers found themselves in a precarious position, as the cost of maintaining quality could be severe for their businesses.
“There is a limit to what consumers can pay for any product, especially if they have substitutes. If the consumer has options, he would rather go for the other options if you price yourself out of his reach. So, the implication is you may be winding down your business unknowingly because, at the end of the day, you start reducing your stock and the size of your store,” Ajibola said.
He also pointed out that consumer goods, from foodstuffs to spare parts, had seen a notable decline in quality over the years as manufacturers and retailers sought cheaper alternatives to stay afloat.
According to the economist, this carried its own risk from faulty electrical materials to substandard car tyres and pharmaceuticals.
“Take vehicles, for example. There are faulty tyres on the road because people can no longer afford the high-quality tyres of the past. Instead, they are buying inferior tyres from China, Asia, and other places with very questionable quality standards. The same issue applies to other motorcycle parts.
“Even electrical materials and electrical cables. The quality ones are so expensive that an average man struggling to put a roof on his head would rather go to the market and pick the inferior ones from other parts of the world. And the consequences? We have seen fire incidents and so on.
“So, it is not an easy thing for both the producers who are selling and the consumers who are buying. But it is important to maintain a balance so that you don’t reduce the quality below what is reasonable and safe for your users, including medicals and drugs,” he added.
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