*Bismarck Rewane, Managing Director of Financial Derivatives Limited, in a recent presentation, explains certain compelling factors driving most Nigerian consumers to choose sachet packaged products over larger packs, stating the Fast Moving Consumer Goods firms are equally reducing product sizes over declining sales volumes to maintain affordability

Gbenga Kayode | 绿帽献妻

The inflationary trend in the Nigerian economy is compelling several consumers to settle for sachet packaged products over bigger packs.

绿帽献妻 reports some analysts have observed the country’s “rosy official statistics” did not align with the citizens’ daily struggles, just as high inflation is also driving manufacturing companies to reduce product sizes for consumer affordability.

Mr. Bismarck Rewane, Managing Director/ Chief Executive Officer (CEO) of Financial Derivatives Limited, noted this development in his recent presentation at the Lagos Business School (LBS) of the Pan Atlantic University (PAU) Breakfast Session.

Mr. Bismarck Rewane, Managing Director/CEO of Financial Derivatives Limited, during his presentation at the LBS Breakfast Session聽 聽 聽 聽 Photo: FDL

In his presentation titled, “Nigerians Question the Data Integrity: Is the Economic Recovery for Real or Is it Just Smoke & Mirror?”, Rewane argued that Nigeria鈥檚 鈥渙fficial statistics paint a rosy picture that does not align with everyday struggles.鈥�

The expert said that 鈥渢he disparity between anecdotal evidence and official data exacerbates concerns about the credibility of Nigeria鈥檚 official statistics.鈥�

On new CPI rebased inflation rate, by Adeniran, Nigeria’s Statistician-General聽

Earlier, the National Bureau of Statistics (NBS) had annouced the country’s headline inflation dropped to 24.48 percent year-on-year January 2025.

This development was regarded as a sharp decline from the 34.80 percent headline inflation recorded December 2024, in line with the Consumer Price Index (CPI) rebasing.

The CPI rebasing means updating the reference year used to gauge price levels in the West African country.

Speaking on the new rebased inflation rate, Adeyemi Adeniran, Statistician-General of the Federation, announced this development during a briefing February 18, 2025, in Abuja, FCT.

Adeniran said the Consumer Price Index, which measures the rate of change in prices of goods and commodities, had declined to 24.48 percent year-on-year January 2025.

The Statistician-General of the Federation further noted that urban inflation stood at 26.09 percent while rural inflation came to 22.15 percent.

The general prices of goods and services in the country declined, compared to the 34.80 percent December 2024, which used the old template, he stated.

Comparative analysis of Nigeria and South Africa’s CPI rebasing exercises

Rewane, however, interrogated Adeniran’s submission on the new CPI rebasing and said the final outcome of the NBS recent rebasing of the Consumer Price Index (CPI) was 鈥渟een by many as a magician鈥檚 sleight of hand.鈥�

He further compared Nigeria鈥檚 and South Africa鈥檚 CPI rebasing exercises, and declared that the same process yielded different outcomes for the two countries.

The expert noted: 鈥淣igeria鈥檚 opacity in data revision fuels distrust and uncertainty in economic data.鈥�

According to Rewane, the West African country’s 鈥渞ebasing led to 11 percent fall in inflation鈥� while South Africa鈥檚 鈥渞ebasing led to increase in inflation to 3.2 percent from 3.0 percent.鈥�

Highlighting the apparent differences in the two countries’ rebasing exercise, the expert attributed the disparities to the fact that 鈥淣igeria had a 15-year gap in updating its base year while South Africa鈥檚 data revision cycle is less than five years.鈥�

Nigeria, he stated, did not release full information on its data revamp while South Africa published the computational detail of its new methodology, concluding that 鈥淪outh Africa maintained credibility through open communication and clear documentation.鈥�

Rewane also contended that 鈥渁ligning Nigeria鈥檚 unemployment definition with supposed international benchmarks now makes the data too good to be used.”

According to him, in respect of the current computation in Nigeria, 鈥渋f you work one hour, you are employed.

“So, unemployment rate revised sharply to 4.0 percent from 33 percent and each Nigerian produced goods worth $800 in 2024.鈥�

He said in South Africa, however, 鈥渋f you work less than 20 hours, you are unemployed. “So, unemployment is currently at 31 percent but output per head in South Africa in 2024 was $6,600.鈥�

On strategies to curb soaring inflation

Rewane, in his presentation, opined that inflation could be tamed either by employing painful economic adjustments, or outright rewriting of statistics.

He equally submitted that the old and new methodologies in computing inflation offered Nigeria different inflation rates, which were 33.4 percent and 24.5 percent respectively January 2025.

鈥淎fter a 12 month of jumbo interest rate hikes, inflation peaked at 34.8 percent in December 2024 but moderated mildly to 33.4 percent in January 2025 (using the old method) but with the new method, it plunged to 24.5 per cent.鈥�

Expatiating further, he averred that 鈥渃omparing the two results will be like comparing apples to oranges.鈥�

Rewane projected that 鈥渨hatever the method, inflation will taper further in February and March 2025.

鈥淭he moderation will be supported by base effects, decline in money supply growth, exchange rate stability, steadiness in logistics cost.鈥�

How investors perceive inflation, by Rewane

On the interplay of inflation, interest rates, productivity, growth and policy shocks in an economy, Rewane stated investors do not look at inflation in isolation.

He affirmed: “They also worry about interest rates, productivity, growth and policy shocks.鈥�

The Chief Executive of Financial Derivatives Limited also highlighted that falling inflation is not falling prices but just slower rises in prices.

鈥淟ess heat does not mean the fire is out. Prices stack up; inflation just measures the speed.

鈥淢oderating inflation means that prices are still rising, but at a slower pace.

鈥淭he question of how slow or how fast may be difficult to answer with unclear methodology,鈥� he said.

The analyst further submitted that 鈥渂ad data is worse than no data; it misleads decisions rather than informing them鈥� as said by certain Dean Abbott.

According to Rewane, he pointed out that despite falling inflation, exchange rate appreciation, and growing Gross Domestic Production (GDP) as portrayed in official statistics, businesses are finding it difficult to grow their volume of sales.

He disclosed while the 鈥渁verage income per capita five years ago was $2009.56 but now $905.2.鈥�

‘Miniaturisation’, sales, ‘sachet economy’ and consumer affordability

The “sachet economy” in Nigeria has been decribed as “the prevalence of products packaged in small, affordable sachets, driven by economic hardship and shrinking disposable incomes, offering access to essential goods for low-income consumers.”

Reeling off statistics to back his submissions in his presentation at LBS, Rewane said the 鈥渁verage turnover for the top five companies showed that sales declined in real terms due to drop in disposable income, high inflation, increased cost of goods sold and squeezed margin.”

But for sakes to increase, the leading financial analyst stated that 鈥渋mproved economic indicators must translate into higher disposable income and purchasing power,.”

He as well noted: 鈥淚f inflation cools to below 20 percent, consumers may feel less pressure to cut spending.鈥�

According to him, the concept of 鈥渕iniaturisation鈥�, which emphasises a shift from premium to budget brands, is now the name of the game currently as businesses are looking for answers to their sales struggles.

On how product end-users are reacting to the market development, Rewane said: 鈥淐onsumers are choosing sachet packaged products over larger packs

鈥淔irms reduced product sizes (shrinkflation) to maintain affordability.”

He also explained: 鈥淐onsumers are down, buying value brands over premium.

鈥淭he FMCGs (Fast Moving Consumer Goods) experienced declining sales volumes as consumers downsised spending habits.”

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