Feature/OPED
Manufacturers, Entrepreneurs and Business Owners: Dealing with Inflation, Competitors and Substitute Goods
By Timi Olubiyi, PhD
The Coronavirus (COVID-19) pandemic, as well as the economic turbulence, have had significant impacts on businesses, manufacturers and households, including individual lifestyles and well-being in recent times.
The direct consequence of these impacts has been a very large increase in inflation numbers in the country, and it is currently having serious implications.
Globally, no country is immune to inflation. Around the world, inflationary pressure has been experienced in the USA, the UK, and many other developed and developing nations. But in Nigeria, the peculiarity is that inflation has been getting higher steadily for the last two years.
Nigeria is one of the countries where inflation has grown the fastest, and it has been a concern for many businesses, and the government due to its severe impact post, COVID-19.
Lately, we have witnessed continued and unexplainable increases in the price of practically every known item and service across the country. The troubling trend is that most of these basic and essential necessities are increasingly out of reach for the majority of people, indicating that the country’s cost of living has risen at an alarming rate. That is, the rise in household spending required to maintain a consistent and decent quality of life has been a source of anxiety for many. The National Bureau of Statistics (NBS) says Nigeria’s headline inflation rate increased to 18.60 per cent on a year-on-year basis as of June 2022. The percentage change is the highest in the last five years, according to the records.
Though academic literature has pointed out that once inflation exceeds a certain level, on average above 15%, it starts to have a negative impact on the economy, principally on economic stability, growth, employment and investment attractiveness. Even so, the author thinks that the real inflation in an economy is shown by the rise in prices of food, groceries, and other goods and services that people use every day.
Without a doubt, the food inflation trend over the last two years has been overwhelming. The proportion of the majority’s income that is spent on food has remained ridiculously high. The persistent rise in inflation results in a decline in the buying power of Nigerians, who are therefore getting poorer. Because they will be forced to prioritise significant spending and the affordability of essentials will continue to decrease. The consequences of high inflation are a spike in unemployment numbers, a rise in poverty rates, declining savings, a high number of jobless youths, crimes, and unrest.
A report by Aljazeera titled Inflation rises in Nigeria amid fuel scarcity and insecurity indicated that four (4) out of ten (10) Nigerians are living below the poverty line. So, with this trend, the author has noticed a spike and sharp rise in the demand for substituted products and services by the majority of the citizenry in the country. The substitution effect usually happens when consumers replace very expensive items with cheaper ones due to price changes or when their financial conditions regress, and vice-versa. However, the point is about the decline in purchasing power due to inflation and its attendant consequences.
The cost of purchasing products and services required to maintain a given quality of life continues to be a major worry for many families and individuals in the country. According to the substitution effect, people switch from more expensive products and services to less expensive alternatives when prices rise or income declines.
For the majority of businesses, the persistent inflation in the country has made the high cost of running and maintaining independently generated power unbearable, particularly the cost of diesel. This has resulted in a high cost of running businesses. However, this cost is passed on to the consumers without notice. When this cost is passed and consumers find it intolerable, then a change in demand by switching to substitute products and services prevail. The propensity for this trend is high and it has been the order of the day. Substitute goods or products are alternative goods that could be used for the same purpose. Therefore, in the presence of inflation, substituting means that consumers seek out alternatives that are frequently low in price, most of the time low in quality, inferior, and largely unregulated.
The demand for substitutes continues to rise because the masses need to survive at all cost, so who has the blame? The consumers or the businesses? So long as the price of goods and products continues to increase, demand for their substitutes will continue to rise.
Consequently, business operators need to be aware of this. For instance, numerous salary earners have been forced to reduce the quality of the food they purchase and business owners continue to replace family food basket staples with any affordable alternative. Meanwhile, the expenses of transportation, school fees, electricity, cooking gas, and rent are equally on the rise, adding to the burden.
From a business perspective, substitute products create rivalry, loss of revenue, weak sales, loss of potential customers or consumers, low or no patronage, and threats to business survival. The main absurdity is that businesses cannot even identify the providers of these alternatives, because they remain largely in the dark. For instance, canned and jarred Sardine Titus is expensive, but Sardine Estus an alternative is available and affordable but the producers are faceless and unknown. Many of such competitors are available in the Nigerian market with a huge market share and competitive pressure. However, the quality of these readily available cheap alternatives is significantly compromised, and market-leading companies and products could even suffer business continuity issues if the lower-priced alternative continues to gain market share and interest of the masses.
As a response, it is a time for businesses to re-strategise, engage in high marketing and promotional campaigns, innovate in line with customer expectations and patronage-improving products, and lower prices.
Again, businesses can review their pricing model at this time to accommodate consumers and customers with waning purchasing power. It is also important for the government to play a bigger role in regulating substandard, inferior, and bad products, especially those that are dumped on the Nigerian market. Right now, it’s important to look at and understand how substitution can affect the economy, businesses, and environment in order to stop high death rates and illnesses.
Businesses can fail entirely as a result of substitute effects and substitution products outperforming the original. In a market where there are fewer substitute products, there is a higher probability of businesses earning greater profits, but the reverse is the case, with inflation and the current realities. So, entrepreneurs, business owners, and SME operators need to clearly understand that their businesses may just suffer from a substitution effect, which can weaken the sales of their products and may be attributed to consumers switching to cheaper alternatives just because they no longer have affordability or the price hike is unbearable.
In the view of the author, consumers largely make their choices based on their available spending power and make constant adjustments based on price changes, most of the time on impulse. So, in a time of high inflation and low consumer spending, cheaper substitutes and second-hand (used) items) are the alternatives that are available. Observation of the surroundings reveals every accessible space or place for micro businesses to operate, its an avenue to trade in second-hand items which the majority now prefer as alternatives owing to dwindling income and affordability at this time due to inflation. This can make it harder for well-known brands or established businesses to get patronage and remain in business if differentiation or other business strategies are ignored to stay cost competitive.
Many are unaware that the high inflation rate in the country is one of the major reasons why Naira is losing value. Therefore, the authors recommend that the government should make a deliberate effort to tackle the key issues in the country: insecurity, incessant power issues, continued exchange rate instability, and non-availability of forex to genuine business operators and exporting companies. Inflation could remain an issue unless these issues are given headlong attention. Good luck!
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Dr Timi Olubiyi, an Entrepreneurship & Business Management expert with a PhD in Business Administration from Babcock University Nigeria. A prolific investment coach, author, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments. The opinions expressed in this article are that of the author- Dr Timi Olubiyi and do not necessarily reflect the views of others.
Embarking on a new year often involves setting ambitious resolutions – a global tradition of striving for personal growth and positive change. We vow to eat healthier, exercise more, learn a new skill, or take on challenging DIY projects. However, as the initial enthusiasm wanes, some resolution may only fall by the wayside.
To enhance your chances of success, let’s delve into some common resolutions and explore key tips that will empower you. This includes setting clear and achievable goals and utilising tools that will equip you for the journey towards achieving those aspirations.
1. Enhancing physical wellbeing: Losing weight or improving fitness often requires a lot of different things working together. To support your efforts, consider utilising tools such as smartwatches to track progress, resistance bands for strength training, and cardio equipment like an exercise bike or treadmill. For home workouts, invest in dumbbells, kettlebells, and a yoga mat. A food scale can aid in portion control. You can also stay motivated by wearing nice workout clothes that makes exercise more fun. These products are all available on Temu, a direct-from-factory marketplace offering year-round deals to help you achieve your New Year’s resolutions.
2. Cultivating healthy eating habits: This often involves prioritising whole foods, minimising processed foods, and increasing fruit and vegetable consumption. To simplify this journey, consider investing in helpful kitchen tools. A food processor can streamline meal prep, while an air fryer offers a healthier cooking alternative. A slow cooker is perfect for effortless and flavourful meals, and a vegetable spiraliser can make eating vegetables more enjoyable.
3. Prioritising stress reduction and wellness: Prioritising wellness is crucial for overall well-being. To reduce stress and feel better, focus on mindfulness practices like meditation or yoga and spend time in nature. Improve your sleep habits. Helpful tools include essential oil diffusers to create a calming atmosphere, weighted blankets for relaxation and comfort, stress balls to release tension and improve circulation, and noise-cancelling headphones to block out distractions.
4. Trying out a side hustle to diversify income: Becoming a social media content curator, for example, is a rewarding pursuit in Nigeria, however, it requires careful planning and execution. Defining your niche and identifying reliable sources of content are crucial first steps. A strong technological foundation is essential for success. This includes a reliable computer or mobile device, a stable internet connection, and specialised software for editing (video, audio, and image). Investing in affordable high-quality recording equipment, such as cameras, is crucial for capturing professional-looking content, while good lighting is essential to enhance its visual appeal.
5. Strengthening personal relationships: This is a valuable resolution that can enhance our well-being and strengthen our relationships. In today’s busy world, it’s easy to let the demands of daily life overshadow meaningful connections. To make this resolution a reality, consider scheduling regular family dinners, planning weekend outings, or dedicating specific times for uninterrupted conversations. Remember that quality time is key; put away distractions and truly engage with your loved ones.
6. Contributing to the community through volunteering: Volunteering your time to a cause you believe in is a rewarding way to make a difference in your community and the world. Find a cause that resonates with you and explore opportunities within your local area. Start small and gradually increase your commitment. Remember that volunteering is a two-way street; it not only benefits the organisation but also provides you with a sense of purpose and fulfilment.
Consistency and adaptability are key to achieving your New Year’s resolutions. Celebrate your successes, be patient with yourself, and don’t hesitate to adjust your approach when needed. Platforms like Temu can be invaluable allies, offering a wide range of affordable products to support your goals. From fitness equipment to kitchen essentials, Temu can effectively equip you without straining your budget.
In Nigeria’s diverse workforce, the conversation around diversity and inclusion (DEI) extends beyond gender to address tribal diversity, socioeconomic representation, and other cultural nuances. Policies that promote inclusivity are crucial for fostering collaboration in Nigeria’s multicultural corporate environment.
“An organisation is only as good as its people. Ensuring those people perform to their best is the role of human capital. Today, the field has a range of tools to ensure real-time engagement and agile interventions for optimal job satisfaction and performance”, – Catia Teixeira, MultiChoice Africa Holdings Group Executive Head of Human Capital.
In both our professional and personal lives, we all strive for growth and development. These opportunities are deeply rewarding, supporting the kind of self-actualisation that makes life most fulfilling. In the Nigerian workplace, where career growth often intertwines with societal expectations and the drive for self-improvement, human capital plays an even more significant role. Opportunities to grow are not just fulfilling but are deeply rooted in our collective ambition for a better future.
Employee engagement is a reflection of how actualised individuals feel in their roles. Engaged employees are more likely to perform at their peak and contribute positively to the workplace. In Nigeria, where the “hustle culture” is celebrated, organizations must create environments that not only nurture growth but also recognize and reward the efforts of their people.
When employees feel enriched and their work aligns with their aspirations, the results are transformative. Growth and development are not just personal milestones—they are the foundation of a thriving organization and, by extension, a more productive society.
Identifying Growth Opportunities
In every workplace, some employees stand out from the first day, while others take time to grow into their potential. Talent management processes must cater to both. For instance, a twice-yearly organizational talent review can help Nigerian companies identify where employees excel and where they need support.
Interactions within the workplace also play a crucial role. In Nigeria’s highly networked professional landscape, creating opportunities for cross-departmental collaboration can open new doors for employees. Systematic development plans, supported by tailored training, ensure that these opportunities translate into tangible growth.
Take the MultiChoice Academy, for example, which offers over 4,000 online courses spanning finance, HR, marketing, and other fields. This mirrors the Nigerian appetite for continuous learning, especially as industries rapidly embrace digital transformation. While face-to-face training remains valuable, customized e-learning platforms are pivotal in bridging knowledge gaps and preparing employees for the future of work.
For any training program, balance is key. Organizations must align employee development with business goals while ensuring individuals feel empowered to pursue their aspirations. In Nigeria, induction programs that connect new hires with company visions and purpose are critical to building this alignment.
One of the most rewarding aspects of human capital management is witnessing success stories unfold. In a country like Nigeria, where talent is abundant, but opportunities may be unevenly distributed, developing talent internally can make a significant impact. Long-term employees bring invaluable institutional knowledge, and nurturing their growth ensures they continue to drive organizational success.
At MultiChoice, we are deeply committed to equipping our workforce with the skills and confidence needed to excel. Whether it’s training young leaders, empowering women in leadership, or developing heads of departments, every investment in our people enhances their value – as individuals and as indispensable assets to the company.
What Diversity Means
At MultiChoice, gender equity remains a key focus. Women make up 46% of our workforce, and 46% of leadership roles are held by women—a significant achievement in a society where women often juggle professional aspirations with traditional family roles. Our promotions policy is designed to push these numbers to 50%, ensuring equity across all levels of the organization.
When entering new markets, MultiChoice intentionally applies its culture of inclusion, empowering women to excel in leadership positions. This commitment extends to addressing barriers unique to Nigeria, such as access to resources and mentorship for women in underrepresented fields.
Data Drives Change
To drive meaningful change, data is indispensable. Nigerian companies often face challenges like high employee turnover and workplace inefficiencies. By leveraging data, organizations can address these issues strategically.
MultiChoice uses platforms like Office Vibe to generate insights into employee engagement, satisfaction, and work-life balance. Weekly surveys and random polls provide actionable feedback, enabling quick interventions and fostering a culture of continuous improvement.
In Nigeria, where trust in leadership significantly influences workplace morale, data can also help bridge gaps between management and employees. Regular focus groups, coupled with robust analytics, ensure employees feel heard and supported. When organizations align employee needs with business goals, the result is a workforce driven by purpose and achievement.
The Collective Goal
In Nigeria, where community and collective growth are deeply valued, human capital strategies should emphasize the power of shared purpose. By investing in people, organizations contribute to a larger vision of national development.
At MultiChoice, every success story is a testament to this philosophy. From training young leaders to empowering women in leadership, the organization demonstrates that growth is a journey best undertaken together. For Nigeria, this represents a powerful blueprint for building a future where individuals and organizations thrive in harmony.
Abba Dukawa
Although I’ve never met Governor Bala Muhammad in person, only seeing him on television, his recent outburst against the federal government’s economic policies resonates deeply with poor citizens’ view.
His concerns stem from empathy for the citizens’ going through unbearable hardships, which have worsened due to the economic situation where millions of citizens struggling with high cost of living, poverty and hardship, reflecting the reality on the ground where citizens face significant economic challenges.
His view resonated with the people in respect of political affiliations have praised Governor Bala for speaking truth to power, acknowledging that the economic policies aren’t working. But his outburst of the economic policies has sparked a heated response from presidency.
Even though President Bola Tinubu claims to have no regrets about his economic policies, aiming to strengthen the country’s economy, policies must be empathetic.
The Tax Reform Bills, in particular, have generated widespread concern, with experts warning of negative implications and advising the government to postpone the bill and engage in further consultations.
The National Economic Council, comprising 36 state governors and led by the Vice President, had expressed reservations about the bill, emphasizing the need for adequate consultation with stakeholders.
However, the Presidency swiftly rejected the NEC’s advice, stressing that the bill is crucial for supporting President Tinubu’s administration in bolstering the country’s fiscal institutions.
Governor Bala Muhammad’s expressed his concerns when hosting Sheikh Yahaya Jangir, a frontline campaigner for the Muslim-Muslim presidency, at the Bauchi Government House.
The governor urged President Tinubu to listen to Nigerians and correct his errors, stating that it’s his duty as a leader to tell the truth.
As Governor Mohammed noted, “I am sure you have heard that we are quarrelling with the president. Yes, it is true we are quarrelling because our people are suffering, and the president has refused to listen to us.”
His comments should not be seen as a critique of the president’s policies, not a personal attack. It’s essential for President Tinubu’s administration to understand the growing concern among Nigerians about the country’s economic direction and the need for effective strategies to address the current economic hardship.
The Presidency, through his Special Adviser, Sunday Dare, responded by urging Governor Mohammed to prioritize the welfare of Bauchi citizens instead of engaging in political posturing. Dare emphasized that the President’s administration is focused on national development and collaboration with state leaders.
It’s worth noting that Governor Mohammed has implemented various poverty alleviation programs, including the Kaura Economic Empowerment Programme (KEEP), to reduce the state’s high poverty rate. He has also prioritized education, with a focus on reducing the number of out-of-school children in the state.
Additionally, Governor Mohammed has taken steps to improve the state’s healthcare system, His administration’s efforts to address these challenges echo the experiences of poor citizens in Bauchi State and across Nigeria.
Overall, Governor Mohammed’s commitment to addressing the pressing issues faced by his state and its citizens resonates deeply with the experiences of poor Nigerians..
Dukawa write it from Abuja can be reached at [email protected]
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