The harsh economic weather occasioned by rising prices, a fall in demand of manufactured goods and exchange rate collapse together with other ancillary factors have all conspired to fuel a 20 percent fall in the production of food and beverages, a development, which has in turn, led to jump in the stock of unsold inventory to 34 percent.
Following the declining demand from consumers as a result of persistent rise in prices reflected in further rise in food inflation rate to 31.52% in October, manufacturers of food and beverages have called out to the Government to do something to reverse the trend.
The fall in demand has also created a spanner in the works for these manufacturers to sell finished goods as their stock value of unsold finished goods rose by 34.03% year-on-year to N78.82 billion in the nine months ending September 30, 2023 (9m 22).
It is no longer news that the inflationary trend in Nigeria has continuously been on a constant upward spiral, rising by 5.95 percentage points to 26.72% in September 2023, from 20.77% a year ago, fuelled in large measure by various intertwining variables including rising energy cost, insecurity, especially in the farming communities in Nigeria, Russia-Ukraine war among others.
Dr. Olufemi Omoyele of the Department of Entrepreneurship, Osun State University, told newsmen that the rise in the stock of unsold inventory not only in food and beverages, but other manufacturing sub-sectors cannot be divorced from the larger picture of dismal state of the economy, the rise in the pump price of petrol by 127.8% this year alone, from N257.12 per litre in January 2023 to an average of N560 per litre in September; all these combining to pressure consumer wallets and undermine their purchasing power.
Consequently, the end- users, who are consumers have been forced to cut their demands drastically or to look for suitable alternative if need be. As consumers are reducing demand or quantity of food and beverages they buy, dealers say they are not finding it funny.
Some dealers in food and beverage products complain of low patronage and consumer apathy. A development they attribute to rising prices, which have made these products unaffordable.
A recent report by the Central Bank of Nigeria (CBN), reveals that capacity utilisation of food and beverage manufacturers fell to 49% in the half year to June 2023 (H123), from 61 percent in the corresponding period in 2022, indicating a 20-percentage point decline.
Meanwhile, the Manufacturers Association of Nigeria (MAN), in its First Half-2023 Economic Review, blamed the worrisome development on the weakened purchasing power of the consumers brought about by diminishing real household income resulting from the ongoing escalation of inflationary pressures.
According to the Director General, MAN, Segun Ajayi-Kadir, the situation was made worse by the scarcity of naira in the first quarter of the year and the aftermath of the subsidy removal and currency weakness.
Director-General, Centre for the Promotion of Public Enterprise (CCPE), Dr. Muda Yusuf, agreed with Kadir, as he also blamed the mounting inventory of unsold goods on the Naira redesign policy and fuel subsidy removal among others, saying that consumers are now reviewing their priorities in terms of spending and are concentrating only on essentials.
According to him, theres the need to bring down the exchange rate and energy costs in order to effect a reduction in the companies cost of production.
