Top four consumer trends to expect from Nigeria’s VAT controversy

The current discourse on Nigeria’s VAT controversy appears to be focusing on who will get a greater piece of the pie between the state and the federal government. Yet, nobody appears to care about the pie maker. There are palpable fears that the controversy will increase the risk of double taxation, accelerate the penalization for non-compliance, and expose start-ups to unexpected tax burdens. A more pertinent question to answer is how the outcome of this controversy will affect Nigeria’s consumer behaviour. Insights from my research and consulting suggest that there are four trends to watch out for in this unfolding drama.

Trend 1: Consumers will fixate on bargain hunting: The uncertainty emerging from the controversy will lead Nigeria’s B2B and B2C consumers to fixate on bargain hunting. Consumers will increasingly demand for the opportunity to negotiate prices and service offerings. Manufacturers and service providers who offer negotiated pricing and pay closer attention to monitoring the consumer’s bargain satisfaction will win the battle. I offer some thoughts on how to exploit customer bargain satisfaction in another article.

Trend 2: Sachet Consumers will reign: The risk of double taxation will increase the consumer’s appetite for sachet products and services. Consumers will advocate for premium offerings at the lowest possible prices. Organizations that are unprepared for sachet products or services may be thrown out of the market. I and a few colleagues discuss how to profit from sachet offerings in a new article.

Read also: VAT dispute creates uncertainty for investors eyeing Nigeria

Trend 3: Consumers will become brand challengers: As consumers re-prioritize their spending habits to focus on necessities, brands will face an increase in complaints over brand relevance. Tax increases will encourage consumers to hold brands accountable. Brands will have to reevaluate their value proposition and question their pricing strategies. Consumers will stick to brands they can hire to do jobs rather than those focus only on emotional appeals. I and some colleagues from Francophone Africa develop this argument and offer some success tips in another article.

Trend 4. Creative consumers will rise: Insights from my research reveal that Nigerian consumers are increasingly using products and services they purchase for purposes different from those envisaged by producers. The likely increase in VAT charges and double taxation will motivate consumers to purchase fewer products for multiple usage purposes. It is time for businesses to remodel products and services for multiple usage situations. I offer some thoughts on how to engage creative consumers in a recent study.

I encourage businesses, retailers, salespeople, advertisers, marketing managers, CEOs and other experts to reflect on these trends as they plan for the last quarter of 2021.

Dr Uzo is the Faculty Director, Senior Lecturer of Marketing Management, Retail and consumer expert of Lagos Business School and the Founder of Afritail.