Scary New Levels Unlocked In Nigeria’s Famously Infamous “Sachet Economy”

5 days ago 40

Despite the talks about Nigeria being the largest economy in Africa, it is rather ironic that its citizens are sinking deeper into a hole of hardship and socio-economic struggle.

The latest report by World Poverty Clock has it that, as of now, over 105 million Nigerians now live in extreme poverty – from 98 million in October 2019.

As it is, two phrases one never thought could be used to describe the same thing: “Africa’s biggest economy” and “the world’s poverty capital,” are both true for Nigeria.

It follows that for any business to survive in Nigeria, it would need to put on a special kind of armor so as not to get knocked down by the challenges it would face.

It’s common knowledge that whether by design or by circumstances beyond anyone’s control, Nigeria has one of the most suffocating business environments on the continent. It’s become an environment where businesses are challenged and pressed. And so only the strong and nimble ones cut it.

In essence, doing business in Nigeria can be an extreme sport, a wild game where only the best players and the best man wins. The best players are those who hold their own through several stages of the game, often by employing new game gets tougher. 

In business, it could be thought that the best man is the one with the best product offering, but that’s not the case with Nigeria. Rather, the best man is the one who, from time to time, tailors his product in line with the state of the economy.

This survival scheme is especially important for businesses whose product follows the line of consumer goods, especially Fast Moving Consumer Goods (FMCGs).

Since consumer goods are needed by humans irrespective of social class to live and survive, then these goods need to continually fit into the realities of the economy to aid its affordability by practically a large majority of the population.

This brings up a wave that has been observed over time in the consumer goods space in Nigeria: the concept of repackaging goods into smaller sachets, or “sachetisation,” in colloquial terms. More often than not, the need for sachetisation is mostly borne out of shrinking income levels and rising poverty; a pair that often manifest in dwindling economies.

It is important to note that sachetisation isn’t something that just began in Nigeria, it’s been around for a long time and is now more like a necessity than an option.

However, in these torrid times when the Nigerian economy is in a terrible decline, new levels of sachetisation have been unlocked. Items like drinking water, liquid soap, disinfectant, and alcoholic drinks are among products that are now being packaged in more affordable small sachets.

The sachetisation trend is known to have kicked off from way back starting from the making of smaller sachets of powdered milk and detergents, up to this point where almost every consumer good you one can think of is now being packaged into smaller sachets. 

Even popular and seemingly “classy” brands have been hit by this new wave.  An example is the revered creamy liqueur brand, Baileys, which have always packaged its products in special bottles of different sizes have had to go down to tiny sachets.

An attempt to point out any FMCG that is yet to be “sachetised” would be a hard and nearly impossible task to carry out in today’s Nigeria.

In countries with a fairly stable economy that is also more developed, small sachets of so many products that have become the norm in the Nigerian market are unlikely to be found. This brings light to the fact that the “sachetisation” trend is most peculiar to low-income countries with especially staggering poverty rates — like Nigeria.

Making sense of Nigeria’s sachet economy

Sachet products were birthed from people not being able to afford the packages in which they were originally sold. It’s mainly a response of producers to the needs of the majority of the market and FMCG companies in Nigeria have had to adjust because, quite frankly, they have no choice.

For a country whose population growth rate since 2015 has continued to increase at a faster rate than its economic growth rate, these happenings aren’t exactly far-fetched.

The ever-increasing population and ever-shrinking economy paint a picture of a country that is procreating far more than it is producing. Coupled with the country’s stunted economic growth, all these have paved the way for the “sachet economy” to not only take shape but also become the norm.

Wide-spread hardship and poverty is no doubt a major cause of the growing adoption of smaller sachet packs. Earlier this month, the World Poverty Clock reported Nigeria to have a total of 105,097,856 living below the poverty line from a total population of 205,323,520. This means that about 51 percent of the population is living in extreme poverty. 

To put that figure in a clear context, if Nigerians who are living in poverty were to form their own country, that country would be more populous than Egypt, one of the Africa’s top three most populous countries.

The umbrella phenomenon that sheds more light on why sachets are becoming a big thing in Nigeria is inflation. Nigeria ended the month of October with “official” inflation rate of 14.23 percent and is the highest rate ever since March 2018. The “unofficial” rate may even be much higher and more accurate.

The high inflation rate shows that items are getting more expensive, and the purchasing power of the local currency, the naira, is diminishing. 

Since Nigeria emerged from the economic recession in 2016, the disposable income of consumers has continued to sink in real terms, as a result of the double-digit inflation rate, which is now worsened by sluggish economic growth.

With this dwindling Nigerian economy, the market now has never been more unpredictable in terms of purchasing power that over time has affected disposable income.

This has led to reduced patronage for many businesses due to unaffordability, and hence leads to the quest for cheaper alternatives. As many consumers could no longer afford to buy in bigger packs, companies have had to resort to a means of reaching these consumers and that is why “consumer pocket-friendly” sachet packaging now is a thing.

These smaller sachets give some of the poorest people in Nigeria access to everyday household essentials. Also, for the companies that produce them, it is a way to increase sales by targeting customers who cannot afford to buy in larger quantities.

The environmental implications of the sachet economy is another matter that seems to be forming a recipe for disaster.

In Nigeria, there also appears to be a leadership and corruption problem, which is often blamed as the root cause of all other issues.

It’s a common argument that with proper-functioning leadership in place, Nigeria can harness its resources and do more as a nation. It remains baffling how Nigeria, despite being the largest oil producer in Africa and home to rich human and material resources, is yet the poverty capital of the world.

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