Minister of Finance, Budget and National Planning, Zainab Ahmed
Consumers’ low purchasing power amid worsening economic conditions has forced manufacturers to repackage several consumer products especially goods in sachets into smaller quantities, SAMI OLATUNJI writes
When images of Morning Fresh, Dettol, and Baileys Delight sachets appeared online, there was outrage on social media.
Many Nigerians have complained on social media about the country’s rising poverty rate and individuals’ low purchasing power. Baileys’ plan to repackage one of its bottled items into 45ml sachet sparked much debate, but it is proving to be an important market strategy.
‘Several businesses have repackaged their products into smaller containers. Dettol (Antiseptic), Hypo bleach, Power Oil, Morning Fresh dishwashing liquid, Quaker 0ats, and Golden Morn have been repackaged their products into sachets.’ This trend will likely continue due to rising poverty and the low purchasing power of Nigerians, experts have argued.
Nigeria, Africa’s most populous country, is one of the largest economies in the world. Most developing countries have significant populations of children under the age of 25, but Nigeria has a low but improving life expectancy and high fertility rates. Because people’s earnings are so low, they have to spend more money on necessities like shelter and food, thereby raising demand for consumer products.
Nigeria would appear to be an ideal target for discounters and large supermarkets, but this is not the case. Most people still shop for their necessities at roadside kiosks or street markets. Consumers prioritise affordability and convenience when making transactions due to the shortage of credit card possibilities. Because housing consumes much of the money, the remainder is spent on basics. This means there is little money available for non-essentials.
Nigerians appear to have minimal purchasing power due to the country’s expanding poverty. ‘The emergence of the “sachet economy” in Nigeria is aided by the country’s high cost of living and faltering economy, which strain customers’ wallets’. ‘Nigerians’ purchasing power is dwindling, making it impossible for them to purchase all of the goods and services required on a regular basis.’
More than 70 million Nigerians are poor, according to the World Poverty Clock’s recent report. Inflation has surpassed 16 per cent and the currency has depreciated by over 60 per cent in six years, raising poverty and misery indices.
The 30,000 earned as the minimum wage is inadequate to cater for a worker in a month.
Because of the poor economy, sachet products are being adopted by firms in the fast-moving consumer goods market.
Nigeria has an enormous market of over 200 million people. This population is in severe straits as a result of poverty and an ever-shrinking middle-class. According to the National Bureau of Statistics, Nigeria’s poverty rate in 2019 was 41 per cent. To put it another way, approximately 80 million people survived on N380 each day as of that period. The economic impact of COVID-19 on Nigeria’s already destitute people is particularly noteworthy, as is the rising inflation. In its report titled, ‘COVID-19 in Nigeria: Frontline Data and Pathways for Policy,’ the World Bank said the general increase in food prices that occurred between June 2020 and June 2021 might have increased the percentage of Nigerians living below the national poverty line from 40.1 per cent to 42.8 per cent.
In another report titled, ‘A Better Future for All Nigerians: 2022 Nigeria Poverty Assessment’, the Washington-based bank said the number of poor Nigerians was projected to hit 95.1 million in 2022.
The bank added that poverty reduction stagnated since 2015, with more Nigerians falling below the poverty line over the years.
Nigeria’s purchasing power has been progressively eroded since the country’s economic recovery began in the second quarter of 2017, owing mostly to high inflation and slow growth. According to the National Bureau of Statistics, the Consumer Price Index rose to 16.82 per cent in April from 15.92 per cent in March. The NBS disclosed this in its latest ‘Consumer Price Index April 2022’ report.
The International Monetary Fund had recently projected that Nigeria’s Consumer Price Index would hit 16.1 per cent in 2022.
The rise in the inflation rate in April shows that Nigeria is not left out in the global inflation surge. But it is also an indication that citizens are becoming poorer, especially given the weakening state of the currency.
These figures demonstrate that in order to make a profit in Nigeria’s mass market, businesses must sell necessities at extremely low prices. Consumer goods companies have used sachets to repackage products in response to Nigerians’ diminished purchasing power.
Despite the fact that many management consultants and brand advocates extol the benefits of sachetizing items, this is not the primary goal. Rather, it is a technique of helping disadvantaged consumers take care of their needs at affordable rates. Businesses have been hampered by deteriorating infrastructure and permeable borders. Because customers’ disposable income is falling, businesses are unable to pass on rising input costs to customers in the form of price increases.
An economist and a senior lecturer of Economics at the Pan Atlantic University, Dr Olalekan Aworinde, affirmed the role of low purchasing power and poverty in driving Nigeria’s sachet economy.
He said, “It could be because of the low purchasing power of the people. When the purchasing power of the people is lower, the tendency is that poverty is on the increase. The truth is that how many households can purchase a tin of Milo or Bournvita? So, because their incomes cannot buy some of these things, they will always opt for these sachet products.
“The majority of these firms are doing all of these things to increase their sales and increase their profit margin.”
A Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Prof Sheriffdeen Tella, stressed that many manufacturers followed the sachetisation trend in order to survive in line with falling income and rising inflation.
He said, “Businesses cannot just fold up. They have to look for ways of survival too. Since their incomes are falling, they have to adjust their packaging to meet the low incomes. They have to adjust downward to survive and meet the needs of the large number of people whose incomes have gone down because of inflation, non-payment of salaries, and some other things that have resulted in a high cost of living for the people.
“They have to adjust to be able to survive themselves. It is not good enough, but it is an indication that the economy is going down.
“It is very clear when they said we are the poverty capital of the world, it is very clear from the kind of products that we now see in the market. These businesses know that when they make bigger products, no one can buy it.”
Chairman, Board of Directors, Manufacturers Power Development Company, Manufacturers Association of Nigeria, Ibrahim Usman, also stressed that this market trend was due to low purchasing power.
He further urged the government to support manufacturers so that they could survive in the country.
He said, “People cannot afford to buy a big tin of milk. So, when you put it in the sachet, it is better for them. The day they has money, they buy the sachets. That is it.
“The government needs to strengthen the competitiveness of manufacturers. They have to ensure smooth logistics, among others.”
He said that the government had not been interested in what the manufacturers were saying due to corruption among government officials.
Nevertheless, sachets not only contribute to the growing environmental crisis, but they are also more expensive. Trash disposal in Nigeria could be a genuine issue. Nigerians do not recycle, and those who do, are underutilised and overworked. This is not surprising given that a huge section of Nigeria’s populace seems unconcerned about environmental issues. However, the “middle-class” is not always ecologically conscious.
A multi-layer flexible sachet recycling technology, which is commonly used for sachet drinks and other household goods, is still in the works. Unilever created a recycling mechanism for multilayer sachets in 2017, although it is not yet commercially available. Due to a lack of equipment, there are very few recycling facilities in Nigeria that can handle multilayered sachets.
Poverty is rarely mentioned while discussing pollution and other environmental issues. Due to the economic slump, numerous businesses have resorted to producing in smaller batches in order to adapt or die. The sachet economy is a total environmental disaster. Despite the fact that waterway pollution is a worldwide issue, many affluent countries are taking initiatives to address it, including reducing the use of plastic packaging, establishing recycling equipment, and implementing strict manufacturers’ rules.
Nigeria’s government, corporations, and citizens must all work together to combat pollution and avoid an environmental disaster. It is critical that the country looks beyond its favourite commercial goods to address the widespread poverty and an imminent ecological disaster.