Hopes of recovery of Nigeria’s struggling marketing communication industry following the slight economic growth from 2.21% to 2.27% last quarter 2019 appears to be dimming again as crude oil price falls drastically.
The falling international crude oil price by over 40% to $37 dollars per barrel due to the ravaging coronavirus outbreak, exacerbated by Saudi Arabia and Russia price war is likely to hit Nigeria hard which heavily depends on oil sales to run the economy.
President Buhari had signed the 2020 budget of N10.6 trillion into law based on crude price projection of $57. According to analysts, if the price stays below this projection for long, it could push Nigeria into another recession. Though, government has started moves to review the 2020 budget.
The oil price staying below 2020 budget projections will affect the Central Bank of Nigeria, CBN’s ability to fund the foreign exchange market and reserves. What this means is that most companies that marketing communication agencies rely on for businesses will find it difficult to access foreign exchange for necessary imports for their operations.
“Companies that depend on forex for import for their operation will find it difficult to operate”, an analyst told BusinessDay. He said that these companies will therefore be cautious in their expenses including marketing communication costs an area that has always taken the hit when companies go through difficult time.
Steve Babaeko, CEO of X3M Ideas, a creative agency described the situation of oil price fall as precarious which will affect businesses across board. “The situation is cloudy and challenging time ahead as clients the agencies work for will be affected.
In his assessment, Kayode Oluwasona of 1201 agency, who frowned at mono product economy of Nigeria as disappointing said the present situation of price fall will increase cost of running businesses.
Stating that companies will though adopt dynamic ways of running their business, Oluwasona who was president of Association of Advertising Agencies of Nigeria said the situation calls for rationalization of expenditures by companies with regrets that communication budgets will be affected.
Akonte Ekine, CEO of Absolute PR said the oil price fall will compel companies to slow actions on certain activities while they will search for effective but cheaper communication channels.
However, since the border closure, some operators in the FMCG sector have intensified efforts to rely on local source of materials and this is expected to increase domestic production but it is yet to witness a boost in spending for marketing communication.
Already, due to the harsh operating environment occasioned by certain government policies, companies have not only cut marketing communication budgets but elongated period of payment sometimes upto 6 months for campaigns and other media jobs executed, a situation that have strained the agencies who borrowed money to execute those assignments.
The difficulty suffered by agencies recently pushed Biodun Shobanjo, chairman of Troyka Group to suggest 60 days on media contract payment by clients through legislation.
This is as an option of saving the marketing communication business as debt within the industry between clients, service providers, media owners and advertising agencies, with its implications, need to be checkmated. But resolution of this will require a tripartite meeting between agencies, clients and the regulatory body to enhance appreciation of each other’s situation.
Daniel Obi
