Decline in Nigeria’s Biscuit Demand Caused by Economic Pressures and Competition

Nigeria’s biscuit industry is witnessing a significant drop in demand due to inflation, consumer spending cuts, and factory closures. Industry leaders report that demand has fallen below five percent as consumers prioritize essentials. Local manufacturers are struggling, with many shutting down operations while facing fierce competition from imported biscuits.

Nigeria’s biscuit industry is experiencing a significant decline in demand, primarily attributed to the financial constraints faced by consumers, inflationary pressures, and the shutdown of several factories. In 2017, a KPMG report valued the biscuit sector at N121 billion, with an annual production of 152,490 tons. However, current estimates suggest that the growth rate in demand has plummeted to less than five percent, as consumers prioritize essential goods over biscuits.

Akin Akintayo, the chairman of the Biscuit and Bakery Group of the Manufacturers Association of Nigeria (MAN), noted that the rapid decline in biscuit sales is impacting average and low-income earners significantly, as they are no longer purchasing biscuits as frequently. He indicated that many manufacturers have ceased operations due to dwindling sales, which he attributes to rising inflation and stagnant incomes forcing households to allocate their resources only for basic necessities.

The 2017 KPMG report also highlighted that the combined market size of biscuits and bread in Nigeria was N243 billion, with the bread segment commanding 80 percent of the market at N122.1 billion. While the bread market has shown moderate growth, the biscuit segment has faced tougher competition, with changing consumer habits undermining previously dominant brands like Deli Foods, while Beloxxi has rapidly expanded its presence.

The impact of inflation is profound, particularly given Nigeria’s low minimum wage, which stands at N70,000 (about $50) per month. This economic strain has led to an increase in unsold inventory across the manufacturing sector—up 12.9 percent to N1.4 trillion in the latter half of 2024. Manufacturers, struggling with decreased purchasing power, face tight operating margins and are often undercut by cheaper imported alternatives.

A considerable increase in biscuit imports has been observed, with Nigeria importing 8,984 shipments between March 2023 and February 2024, mostly from India, China, and the UK. Such imports have surged by 205 percent, reflecting a higher demand for foreign products amid local struggles. This has placed further pressure on local manufacturers, who are already grappling with high production costs and the impact of foreign exchange rates.

Fola Osibo, former chairman of the Biscuit and Bakery Group, recognized the extensive challenges facing manufacturers, including unfavorable policies and the high costs of raw materials. These difficulties have led several biscuit manufacturers to halt production, while others are fighting to remain viable amidst these adversities. Muda Yusuf, director of the Centre for the Promotion of Private Enterprise, corroborated this, highlighting that firms are often operating at low capacity and reporting losses due to escalating interest rates and currency constraints. In a significant shift, Mayor Biscuits Company Limited recently shut down its production line to redirect efforts towards different business ventures.

The Nigerian biscuit industry is currently facing severe challenges due to a combination of economic pressures, shrinking consumer spending, and increased imports. As purchasing power declines and inflation rises, many local manufacturers face operational difficulties that have resulted in production shutdowns. The market landscape has shifted, with some local brands gaining ground while others are struggling to survive. Stakeholders in the industry must address these issues to ensure future viability and competitiveness.

Original Source: businessday.ng