Consumer resistance: Nigeria’s rising unsold goods amid declining inflation

Nigeria has reported five months of lower inflation rates, from November 2024 to May this year, relative to 2024. However, this trend is at variance with the reality confronting producers, sellers and consumers of end-user goods in our markets.  The National Bureau of Statistics is presenting the trend as proof of the success of the […]

Nigeria has reported five months of lower inflation rates, from November 2024 to May this year, relative to 2024. However, this trend is at variance with the reality confronting producers, sellers and consumers of end-user goods in our markets.  The National Bureau of Statistics is presenting the trend as proof of the success of the economic policies, both monetary and fiscal, being implemented by the government and its agencies.

However, a worrisome fact is emerging that the authorities must not overlook: There appears to be a growing case of consumer resistance in the face of the high inflation that Nigerians experienced last year. This is manifesting in rising levels of unsold goods, especially finished products. Both producers and sellers are telling stories of unsold goods mounting, some with severe consequences for the wholesalers. Particularly hit in this area are distributors of perishable goods and those with short shelf lives. These include food items and some drugs.

A couple of facts arise from this phenomenon. First, it goes back to question the relevance of the current method applied by the NBS in the computation of Nigeria’s inflation figure.  The rising incidence of unsold goods adds to the rising number of questions on the current measurement of inflation in Nigeria, in terms of the realism in the figures being quoted.

Just a recap here: Nigeria ended the year 2024 with an inflation rate at a peak of 34.8 per cent. Before then, it rose as high as 33.88 per cent in October and 34.6 per cent. Then, suddenly, through a rebasing of the CPI computation method by the NBS, it fell to 24.48 per cent at the start of the New Year, with clearly no material change in the economic activities in the country. This continued in February as inflation fell further to 23.18 per cent, but there was a spike in March to 24.23 per cent; then a decline to 23.71 per cent in April and another to 22.97 per cent in May, the latest figure released by the statistical agency.

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The picture presented by the inflation trend is not in sync with the story in the marketplace, in the real world. Our manufacturing sector is saddled with unsold finished goods stock, which rose to N2.1 trillion in 2024, according to their umbrella organisation, the Manufacturers Association of Nigeria.

“The inventory of unsold finished goods surged by 87.5 per cent to N2.14 trillion in 2024,” Segun Ajayi-Kadir, the Association’s Director-General, told a bewildered nation in a statement in April. He attributed the trend to “Escalating production costs and declining consumer demand”.

Interestingly, the manufacturers are not alone in this. Even their distributors and other marketers who pick the goods from them are getting saddled with unsold goods as well. And in some cases, this is imposing rising costs on the sellers. A seller of consumables in the Mushin market in Lagos lamented to this writer over the incidence of rising unsold goods, with many of them becoming unsellable because they have expired. Even manufacturers now occasionally come around the markets to sell such goods, with expiry dates around the corners, at giveaway prices. They do this just to cut their losses. The trader blamed this on low demand for consumer goods generally.

Ponder over this. Sellers buy goods from manufacturers or wholesalers, and then they get stuck with the goods because of low demand. Ajayi-Kadiri further narrowed down this phenomenon to its roots: “At a point in the production process, consumer resistance becomes inevitable if prices become out of reach based on their purchasing power; they will resist. And when the consumer resists, the first sign is what we see: a backlog of unsold goods,’ he noted.

“This usually leads to a factory closing or relocating when operations become unprofitable, as consumers are not buying. And they are not buying because they cannot afford the price. This is a very dangerous symptom for manufacturers.”

Consumer resistance is a sign of declining consumer welfare. Consumer purchasing power has fallen so much that many now just try to buy the smallest unit of a commodity. There are stories of food sellers who now cut tubers of yam into several pieces for some consumers to be able to buy them. This is a response to the astronomical rise in the price of yam, with a typical tuber now selling for as high as N7,000 to N9,000. So, yams are now sold in pieces, not tubers, and some people can buy for N1,000 or N2,000. And you ask, what will N2,000 worth of yam do for a family of four?

So, if the prices of these goods have fallen or are falling as the inflation reports purport to tell us, where is the low demand coming from? The most likely explanation for this discrepancy is that the reported inflation decline is not reflected in the current prices of goods and services. There is a high probability that high prices will persist in the market, hence the inability of consumers to place effective demand for goods.