• Wednesday, July 24, 2024
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Shrinkflation 201: Shrinking sizes, soaring prices, and the struggle for survival

Shrinkflation 201: Shrinking sizes, soaring prices, and the struggle for survival

Nigerian consumers are experiencing a troubling trend known as ‘shrinkflation.’ This occurs when product sizes shrink while prices remain the same or even increase, drawing concern from both consumers and economists.

Imagine a sneaky force shrinking your groceries while keeping the cost high. Shrinkflation combines “shrink” and “inflation,” and while it might seem minor initially, it significantly impacts purchasing power and the economy. This subtle change is causing growing worry among Nigerians.

Can you believe that a single tuber of yam now costs an average of N6,500? A smaller bag of beans is being sold for N140,000, while a bag of long-grain rice goes for N80,000. Even a kilogramme of turkey is becoming unaffordable, and the price of chicken is skyrocketing.

Read also: Global food prices remain steady in June

It is alarming how Nigerians are finding themselves paying the same amount or more for significantly less, eroding their purchasing power and stretching household budgets thin.

This situation disproportionately affects average Nigerians, who used to buy groceries in bulk to benefit from economies of scale. Now, they’re confronted with the harsh reality that their basic salaries no longer stretch far enough to cover the cost of essential groceries and food items.

This comes at a time when many households are already grappling with inflationary pressures. In May 2024, the headline inflation rate surged to 33.95 percent, while food inflation spiked to 40.66 percent, according to the National Bureau of Statistics (NBS). These staggering figures reveal the growing financial strain on Nigerian families.

Amidst these economic uncertainties, incomes have failed to keep pace with rising prices, leaving consumers in a precarious position. As salaries remain stagnant or increase at a slower rate than inflation, individuals and families are compelled to navigate difficult choices regarding their spending priorities.

A troubling revelation that extends beyond shrinkflation reveals a darker reality in Nigeria’s food market. Unethical practices among food sellers, particularly concerning rice, paint a grim picture of exploitation within the industry.

A recent BusinessDay survey uncovered alarming findings: some rice vendors engage in deceptive tactics by repackaging lower-quality rice, blending it with higher-quality grains, and selling it at premium prices averaging around ₦80,000 per bag.

But the deceit doesn’t stop there. Shockingly, certain sellers go further by mixing three different rice varieties within a single bag, layering them with the lowest quality rice at the bottom, fair-grade rice in the middle, and the highest quality grains on top. These practices aim to maximise profits at the expense of unsuspecting consumers.

This raises the question: Is the government complicit in these fraudulent schemes? While some sellers cite economic challenges to justify reducing product quantities, their actions betray a more sinister motive.

Despite the tough economic climate, the sale of adulterated rice at inflated prices reflects a blatant disregard for consumer welfare and ethical business practices.

This downward trend in the chart reflects growing economic challenges, increasing inflation, and decreasing purchasing power. Consistently negative values indicate that consumers are increasingly pessimistic about the economic outlook and their financial situations. As confidence declines, potential declines in consumer spending and economic activity may occur.

“It is alarming how Nigerians are finding themselves paying the same amount or more for significantly less, eroding their purchasing power and stretching household budgets thin.”

A food seller near the Ikoyi NNPC axis lamented the relentless rise in food prices. “Despite the increased cost of ingredients, I’ve maintained the unique taste of my dishes,” she said.

“The prices are really biting hard. I used to buy a cow leg for N3,000, but now it’s N9,000, so I’ve stopped selling it. I struggle to make a profit of N5,000 from goat meat. It’s been tough for both my customers and me. While pepper prices are falling, tomatoes remain expensive unless you buy the bad ones,” she added.

Mrs. Esther Abayomi, a working mother, voiced her concerns, saying, “As a working mother trying to stretch every naira, shrinkflation is hitting us hard. I used to rely on buying in bulk to save money, but now I’m getting less for the same price.

“It’s frustrating because it feels like our hard-earned money is buying less and less each time I go grocery shopping. With prices going up and sizes going down, it’s becoming increasingly challenging to provide for my family.

Read also: Nigerians say protecting farmers from herdsmen attacks is crucial for stabilizing tomato prices

“As a healthcare professional, I am deeply troubled by the rising costs of medical supplies and medications. It’s not just about higher prices; it’s an erosion of patients’ access to essential care,” said Dr. Aisha Bello.

“From a financial perspective, these price increases distort budgeting and affect healthcare outcomes. When medical supplies become more expensive, it strains hospital budgets and insurance systems. This makes it crucial for policymakers to ensure transparency and fairness in pricing to protect patients from undue financial burdens.”

This underscores the necessity for a more comprehensive approach to measuring inflation—one that includes both price changes and alterations in product sizes. Failing to consider these factors could lead to misunderstandings of the economic pressures consumers face and result in misguided policy decisions.

Shrinkflation is not just a concern for working Nigerians; it’s hitting folks like Adeolu, the furniture man in Olambe-Akute axis, and Ogun State hard too. “Now that I’m not actively making furniture, every naira matters,” he sighs.

“But with the way things are now, it feels like my savings aren’t stretching as far as they used to. I’ve had to cut back and tighten my budget to make things work.

“It’s frustrating to watch my purchasing power decrease, especially after putting in years of hard work to secure my future. I’m worried about affording everyday things if prices keep going up and product sizes keep going down. It is a tough situation to be in.”

In response to these challenges, The Professionals Update Forum emphasised the critical importance of prioritising transparency in pricing practices by policymakers and businesses to safeguard consumer welfare.

Read also: Nigerians turn to cucumber, cayenne pepper as tomato prices bite

Ignoring the issue of shrinkflation risks exacerbating existing economic disparities and hindering efforts towards sustainable economic recovery and growth. The lack of transparency not only erodes consumer confidence but also undermines the foundation of a resilient economy.

Addressing shrinkflation promptly and effectively is essential for fostering an environment conducive to equitable economic progress. The professionals underscored the urgency of collective action in tackling this pressing issue.

 

Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).