In times of economic turmoil, it becomes increasingly difficult for businesses to sustain their trade and remain competitive whilst delivering the best quality product or service.
Businesses and even government agencies are under pressure to put their customers or consumers into further difficulty by reviewing prices upwards to remain in business and provide the service they are expected to.
In an import-dependent economy like Nigeria’s, where currency value fluctuation is the order of the day, the decision to increase prices, difficult as it is, is largely influenced by the desire of the business to preserve itself as a business that continues to offer value.
Businesses have had a difficult year so far with the negative impact of the Corona virus and the sudden slump of the Naira against most international currencies. The earliest to feel this impact were fast moving consumer goods and services.
The cost of household items continues to climb and even government agencies have been forced to increase the cost of services. Minister of Finance, Zainab Ahmed, recently announced that unless Nigeria achieves a strong third quarter economic performance, the country may slide into recession. If this happens, Nigeria would be following the likes of the United Kingdom and quite a few other countries. Poor economic indices occasioned by the Covid-19 pandemic have become a global trend, slowing economic activities across the world.
In the midst of all of these, fear about rising prices of commodities, products and services has generated concerns for many. For instance, the pump price of Petrol has risen from N143.50 to between N148.50 to N150 per litre. This is a situation that often leads to a hike in transportation fare and ultimately, an increase in the price of products.
This increase in price is not just in the Oil and Gas sector but has cut across other sectors from Federal to state governments and corporate organisations.
The Federal Government increased the Value Added Tax (VAT) from 5 per cent to 7.5 per cent, the exchange rate between the Naira and dollar has increased significantly and continues to do so.
The Lagos State government announced an increase in the fares of its BRT services by 46%, while the Federal Government recently directed landlords and property agents to charge 0.78% stamp duty on tenancy and lease agreements. Several government agencies have also reviewed their charges.
This situation is scary for Nigerians because of the potential of a domino effect. Most companies and brands will have no choice but to implement price increases in order to sustain their business, many of which are already negatively affected by the Covid-19 pandemic and a number of other challenges posed by the unfavorable conditions within the Nigerian business environment.
As it stands, companies are barely coping, struggling to retain their workforce and pay salaries with most sectors already implementing pay cuts.
One of the immediate impacts of the pandemic is the scarcity of products and a disruption of the international supply chains. With China, the factory to the world, being the first to be hit by the virus, companies across the world and their brands are already experiencing dips in their supply capacity. This is aside a rapid change in consumer behaviour to accommodate more of essential products and services forced upon them by dwindling spending power.
The COVID-19 pandemic is thought to have led to more than a third of the world’s population affected by the lockdowns imposed by governments to stop the spread of the virus, which has severe disruption of economic activities around the world. The outbreak of the pesky virus came soon after the global economic slowdown of 2019, which saw stagnation of stock markets and consumer activities worldwide.
Globally, brands have begun to implement gradual prices increase to ensure sustainability, and for brands in Nigeria, which are already struggling to keep their heads above water, staying afloat without increasing prices yet is the equivalent of a miracle and a half.
That is unlikely to continue for much longer except they do not want to remain in business and wish to add to the soaring unemployment figures