Low consumer confidence, weak demand keep Nigeria trade sector in recession

Wholesale and retail trade sectors in Nigeria have been contracting due to weakening purchasing power and low consumer confidence.

Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS) on the on three months ending June (Q2), shows the trade sector contracted by 2.14 percent in Q2 2018 which was a slight improvement by 0.43 percentage points from the contraction of 2.57 percent recorded in Q1 2018.

However, the sector has remained in recession since the three months ending March (Q1) 2018 after recording a brief positive growth in the three months ending December (Q4) 2017 of 2.07 percent.

“Consumer confidence has not been restored and purchasing power is very weak. consumers cannot afford to purchase the same volume of goods and services they used to consume at the same level of income so that is affecting the trade sector and also demand for consumer goods is still very weak,” Johnson Chukwu , CEO, Cowry Asset Management Limited said to BusinessDay on phone.

Consumer spending which fell by 0.99 percent in 2017 based on NBS data affected Africa’s biggest retail store, Shoprite as it recorded a single digit increase in sales as turnover grew by only 4 percent in 2018 compared to 50.4 percent recorded in 2017.

The Central Bank of Nigeria Consumer Survey Report for Q2 2018 showed that consumers’ overall confidence outlook worsened in Q2 2018, as more consumers were less optimistic in their outlook. The index fell to -6.3 points which was 10.7 points lower than the index in Q2 2017. The report stated that consumers attributed the moderation in their outlook to worsening economic conditions.

According to analysts, the weak purchasing power of consumers could be as a result of the declining per capita income which has being falling since 2015.

This has lowered demand for commodities in the wholesale and retail sectors of the economy.

Data released by the International Monetary Fund (IMF) show that per capita income in Nigeria declined by 27.8 percent to $1,994 in 2017 from $2,763 in 2015.

Despite the slight improvement, this is the eighth negative quarterly growth rate in the trade sector in the last nine quarters making it one of the worst performing sectors of the economy since Nigeria exited the recession.

There are hopes that the increase in minimum wage which may take effect in September will help boost the confidence and purchasing power of consumers

“If there is an increase in wages and salaries across broads it will increase demand and purchasing power of consumers. They are also reviewing the minimum wage which will have a positive impact on consumers by improving the standard of living and income,” Chukwu said.

BUNMI BAILEY