Business
Economic hardship: Manufacturers grapple with unsold, expired goods
By AYOOLA OLAOLUWA
The continued decline in the purchasing power of many Nigerian consumers as a result of galloping inflation has hit many businesses, especially manufacturers, hard, Business Hallmark findings have revealed.
Many businesses recorded their worst performances in 18 years at the end of the 2023 business calendar. Apart from factors, such as harsh economic climate and unfriendly government policies, the companies poor performances could be traced to the consistent spike in the prices of goods and services.
The situation has forced many consumers to continuously look for cheaper and affordable products or cut down on their spendings, putting many manufacturers in limbo.
Nigerians, it would be recalled, have been coping with a worsening cost-of-living crisis as government after government failed to turn around the nation’s declining economy.
According to a data released by the National Bureau of Statistics (NBS) on December 15, 2023, Nigeria’s annual inflation rose for the 11th straight month to 28.20% in November 2023 from 27.33% in October of the same year.
The last time Nigerians experienced this level of inflation was during the administration of former President Olusegun Obasanjo in August 2005.
Expectedly, the economic downturn, apart from negatively affecting the middle class, had further pushed many low-income Nigerians into abject poverty.
Unable to maintain their living status, many Nigerians are daily embracing austerity and belt-tightening measures to keep afloat.
Unfortunately, many businesses, especially producers of goods that have limited shelve-lives, are now on the receiving end of consumers belt-tightening measures to survive the economic hardship.
Though, there are no official figures yet for the second half of 2023, BH gathered from industry players that inventory of unsold finished products in the manufacturing sector is expected to rise at the end of Q4, 2023.
Multiple sources in the Manufacturers Association of Nigeria (MAN), while speaking with our correspondent at the weekend, put inventory of unsold finished products in Q4, 2023 at between N370billion to N450 billion, up from N271.96 billion recorded in Q3, 2023.
An industrialist, Chief Bayo Ajaikaye, blamed the surge in unsold finished product inventory to the weakened purchasing power of consumers.
“The trend didn’t start now. It started a long time ago and worsened during the second term of former President Muhammadu Buhari.
“We (producers) were trying to manage the situation until the new administration’s twin policies of fuel subsidy removal and the unification of all foreign exchange windows torpedoed everything.
“The two policies, apart from pushing up the costs of producing goods, pushed millions of Nigerians into poverty.
“Even, the middle class is also affected. Consumers now look for bargains and cheaper goods. Unfortunately for local products, the influx of cheaper foreign goods didn’t help matters.
“As a result, many locally produced goods are now rotting away in warehouses and store shelves without buyers to buy them
“Worst hit are manufactures producing consumables like beverages, drugs, bottled water, sausages and biscuits with short shelf lives”, Chief Ajaikaye noted.
BH findings during the Christmas and New Year holidays revealed that a large chunk of goods sold during the period had already expired. For instance, the four packs of Mirinda, Pepsi and 7Up produced by Seven Up Bottling Company purchased for the festivities by this writer had all expired.
Investigation revealed that the products expired in the warehouse of the seller, as replacement products bought directly from Seven Up Bottling Company’s depot located at Olaniyi Road, New Oko-Oba have February and March 2024 expiry dates.
A quality control staff at Seven Up Bottling Company told our correspondent that the products did not expire in their custody.
According to him, the firm always destroyed expired products in the presence of health officials even before their actual expiration dates.
“We are also affected by the slump in sales. But we won’t push expired products into the market, never! We usually accept our losses and destroy expired products.
“Nigerians should always look out for the production and expiry dates of not only our products, but also other brands and endeavour to return expired ones which can be injurious to their health”, the staff, who spoke on the condition of anonymity admonished.
Meanwhile, many Nigerians, who spoke to BH on the development, confirmed that they also unknowingly purchased expired goods from retailers during the Yuletide.
Four out of every 10 respondents confirmed they were victims of unscrupulous marketers, who sold expired products to them.
However, many of them, rather than return or destroy the expired products, said they went ahead to consume them as they had no alternatives.
A driver working with an insurance firm on Marina, Lagos Island, Tana Irikefe, told our correspondent that he also bought an expired product meant to celebrate Christmas with his family, but decided to keep it because of what it will cost him to return it.
“If I destroy the product (Semovita), where will I get a replacement? I bought the product at Obalende, Lagos Island on the last working day of last year on my way home.
“To return the defective product, I must spend at least N2,700 on transport fare from my base in Abule-Egba to Obalende and back.
“How much did I even buy it (Semovita). It will be a foolish venture to embark on such a journey. Consuming 1kg bag of expired semovita will not kill me and my family”, Irikefe declared.
Hide original message
In his reaction, an economist, Dr. Ikenna Nwosu, warned that more companies will shut down because of the economic downturn brought about by government policies.
“It (government policies) will lead to some companies shutting down. First, if the cost of production and the cost of their raw materials exceed a particular stage and they can’t sell their final products because the market does not accept a certain price, they will lose.
“So, many people are going to stop production, and that means there would be unemployment, maybe temporary unemployment. They could close down for some time, so there would be a snowball effect”, said Nwosu, who is a facilitator with the Nigeria Economic Summit Group (NESG).
The Manufacturers Association of Nigeria (MAN), it would be recalled, had lamented the spike in inventory of unsold finished products in the manufacturing sector by 45.4 percent Year-on-Year (YoY) in the first half of 2023 (H1’23) to N271.96 billion from N187.08 billion in the corresponding period of 2022 (H1’22) on account of escalating inflationary pressures.
The association, which stated this in its First Half of 2023 Economic Review, added that the situation was compounded by the scarcity of naira in the first quarter of the year (Q1’23) and the aftermath of the subsidy removal by the Federal Government.
“The inventory of unsold finished products in the manufacturing sector saw a significant increase to N271.96 billion during the first half of 2023, as compared to N187.08 billion recorded in the corresponding period of 2022. This indicates a substantial rise of N84.88 billion or 45.4 percent over this timeframe.
“This increase in inventory can be attributed to a weakened purchasing power of the consumers, brought about by diminishing real household income resulting from the ongoing escalation of inflationary pressures, compounded by the scarcity of naira in the first quarter of the year and the aftermath of the subsidy removal”, MAN stated.
The umbrella body of manufacturers operating in the country also disclosed that a total of 3,567 jobs were lost in the manufacturing sector in H1’23, representing an increase of 1,855 in job losses when compared with the 1,709 job lost in the corresponding period in 2022 (H1’22), and an increase of 805 jobs lost when compared with 2708 jobs lost in H2’22.
The Director General of MAN, Segun Ajayi-Kadir, attributed the increase in job losses to the unfriendly business environment and hastily implemented policies.
