Recession Poses Huge Problems For Nigerian Companies

Early last week, DSTV raised the tariff on their subscription packages across the board. This is in no small part due to the fact that all the content consumers love are paid for in dollars. Although several Nigerians raised objections to the sudden increments, economic indicators suggest that more price hikes may be coming from other sectors of the economy.

According to an economist, MrJoseph Aderibigbe, for businesses to survive in this recession, they can either reduce your costs or increase prices. “When you reduce costs however, the quality of your products and services may suffer. In order not to compromise on quality, some companies are being forced to raise prices,” he said.

Already, commodities now cost significantly more than they did in 2015. For example, the price of rice has increased by 100% and other staples have followed suit.

As the naira continues to lose its value against the dollar, imported raw materials and business consumables remain significantly expensive. This, combined with the cost of diesel, which sometimes sells for as much as N265 per little, piles a great amount of pressure on local businesses.

Nestlé Nigeria Plc, Nigerian Breweries Plc, Dangote Cement Plc and Lafarge Africa made a combined loss of N51.86 billion in the first half of 2016, according to a report by The Guardian.  The Hospitality sector is not left out  as Intercontinental Hotel and Radisson Blue are also affected.

“Commercial banks will be charging up to 25 to 30 percent on the average. That’s what they will be charging people that want to go into business,” said Paul Alaje, the lead economist at the Abuja-based, SPM Professional Associates LTD. “We should make no mistakes about it; this recession is really bad.”

Even the Telecoms companies are not left out as the running costs have become unbearable. Before the recession hit Nigeria in 2015, telecom companies such as Etisalat, Airtel, Glo, and MTN were plagued with rarely reported expenses. Now, the mounting pressure of infrastructural costs which is mostly dollar based is taking a huge toll on their revenues.

For many Nigerians, the choice has to be made: either we accept these new price realities so that these companies survive or resist and see the domino effect on all other businesses.

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