Inflation: Declining Demand Trigger Fall In Food, Beverage Production
Inflation: Declining Demand Trigger Fall In Food, Beverage Production
Manufacturers of food and beverages have reduced production by 20 percent following declining demand from consumers as a result of persistent rise in prices reflected in further rise in food inflation rate to 31.52 per cent in October.
The fall in demand has also made it difficult for these manufacturers to sell finished goods as their stock of unsold finished goods rose by 34.03% year-on-year to N78.82 billion in the nine months ending September 30, 2023 (9M’23).
Recall that the inflation rate in Nigeria has been on a constant increase, rising by 5.95 percentage points to 26.72 percent in September 2023 from 20.77 percent a year ago, triggered by various factors including high energy cost, insecurity, especially in the farming communities in Nigeria, Russia-Ukraine war among others.
Some traders said that the constant increase in the prices of the products her company deals on by the manufacturers has led to significant drop in the level of patronage and switch by consumers to unbranded alternatives where necessary.
From our end as wholesalers that buy directly from the companies, we now ration the money we have to be able to buy little of different products from different brands and stock in order to satisfy the customers’ demand.”
As a result of the rising trend of low demand from consumers, manufacturers of food and beverages experienced huge increases in the stockpile of finished goods which prompted a 20 per cent reduction in production.
Meanwhile, the Manufacturers Association of Nigeria (MAN) in its First Half 2023 Economic Review attributed the troubling development to the weakened purchasing power of the consumers, brought about by diminishing real household income resulting from the ongoing escalation of inflationary pressures.
According to the Director General, MAN, Segun Ajayi-Kadir, the situation is compounded by the scarcity of naira in the first quarter of the year and the aftermath of the subsidy removal and currency weakness.
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