By Chinwendu Obienyi
Nigeria’s Fast-Moving Consumer Goods (FMCG) sector is grappling with a substantial decline in transaction volumes, as revealed by the latest NielsenIQ report. The economic strain caused by escalating inflation has resulted in a notable 17.4% drop in transaction volumes as of March 2024, a significant worsening from the 4% decrease recorded in 2023. This sharp decline underscores the severe economic challenges facing the country.
The inflation rate, which surged to 34.2% in June 2024, has significantly eroded consumers’ purchasing power, intensifying the burden of the high cost of living. Despite these difficulties, the FMCG market’s value has shown remarkable growth, increasing by 21.6% in 2023 and further accelerating to 24.8% in 2024. This paradox suggests that while the volume of goods purchased is shrinking, consumers are spending more on essential items, thus driving up the overall market value.
Joyce Nwachukwu, Associate Director of West Africa at NielsenIQ, remarked, “This trend indicates that although consumers are purchasing less, their expenditure on essential goods has risen, contributing to the overall growth of the market.”
The report highlights the profound impact of the cost-of-living crisis on Nigerian consumers, with 81% of survey respondents indicating that their financial situation has worsened compared to the previous year. The crisis is primarily driven by soaring costs, particularly for fuel and food, coupled with an economic slowdown.
An in-depth analysis of various FMCG sectors—including home care, personal care, confectionery and snacks, non-alcoholic beverages, and food—reveals that manufacturers who have embraced innovation are experiencing notable growth.
Companies with innovative sales strategies are, on average, 1.8 times more likely to see overall sales growth despite the prevailing economic challenges. Specifically, home care and personal care sectors have witnessed substantial benefits from innovation, with sales increases of 4.2 times and 2.9 times, respectively.
The study, which examined over 60,000 innovations over a span of four or more years, challenges the prevailing assumption that innovation success rates are low. It found that 52% of innovations led to sales growth in the second year compared to the first, highlighting the critical role of innovation in achieving business success.
Bayonle Oseni, Head of Innovation Insights (BASES), East & West Africa at NielsenIQ, commented, “Prioritizing innovation and investing in research and development can unlock significant growth opportunities. By understanding varying levels of innovation vitality across different categories, companies can better allocate resources and enhance their success rates.”
Faith Wanderi, Managing Director of NielsenIQ (East and West Africa), emphasized the need for businesses to grasp consumer behavior and shifts to make informed decisions. She noted that consumers are currently less brand-loyal, suggesting that manufacturers should explore innovative approaches—such as varying product sizes—to connect with their audience.
Nigeria is enduring its most severe cost-of-living crisis in a generation, with inflation hitting 34.19%—the highest in 28 years—and food inflation exceeding 40% as of June 2024. Despite the decline in transaction volumes, the FMCG sector continues to find growth opportunities through strategic innovation and adaptation.
The inflation surge has been exacerbated by the removal of the petrol subsidy in May 2023 and the devaluation of the naira by over 100% since June 2023, as implemented by the Central Bank of Nigeria.
