Consumers to sustain spending on essential commodity this year
Latest insights have shown that a larger part of consumer spending will go into food and other essential commodities this year. These confirm a recent survey of the Central Bank of Nigeria (CBN) suggesting that consumers would continue to exercise in-spending till inflation eases.
With the pandemic still ongoing, the reports envisaged that people will continue to take a cautious approach to mingling in crowds and will spend more time at home than in previous years, behaviour that will increase house expenditure on food and other essential commodities.
According to the 2019 Household consumption expenditure report released by the National Bureau of Statistics (NBS), out of the N40.2 trillion on food and non-food items during the period, Nigerians spent N23 trillion on food alone, as food consumed outside the home gulped N4.59 trillion.
Updated data from the World Economic Forum (WEF) showed also that Nigerians spend more money on food than any other country in the world. Food takes up an astonishing 58.9 per cent of Nigerians’ incomes, it stated.
The CBN survey showed that the buying intention indices for consumer durables, motor vehicles and houses were below 50 points, showing that respondents have no plans to spend on big-ticket items in the next twelve months.
Data from TradeDepot, the B2B eCommerce platform for consumer goods in Africa, showed that the impact of the pandemic, rising inflation, border closures and other issues that drove significant changes in behaviour for retailers, distributors and manufacturers in 2020 will remain dominant this year.
As the sector settles into the new year, the firm predicts that some of the main trends that shaped 2020 – particularly smaller packaging for consumer goods and increased spending on food and essential goods due to dwindling disposable income and people spending more time at home – will continue to influence behaviour across the market.
Nigeria’s retail sector is the third-largest contributor to Nigeria’s Gross Domestic Product (GDP) and more than 90 per cent of the sector is made up of informal retailers.
The report projected that manufacturers would adapt to rising inflation and dwindling disposable income by extending the trend of smaller packs to other product categories. It added that manufacturers would explore more alternative route-to-market channels with capabilities to build retail networks and offer logistics-as-a-service to mitigate the risks that come with serving new customer bases.
CEO and Co-Founder of TradeDepot, Onyekachi Izukanne, said: “The retail sector is one of the strongest pillars of the Nigerian economy but the absence of data and verifiable insights often makes it difficult to assess the opportunities and challenges that abound in the space.
“Infrastructure and logistics issues that undermine the efforts of the industrious business owners also hamper the sector. With some more support from the government, public institutions and private sector players, there is an opportunity to transform the Nigerian retail market and achieve a quick win for boosting the GDP”.
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