Drop in Consumer Confidence, Marketing Budgets Still Big Issues

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Raheem Akingbolu takes a look at marketing activities in the last two years, positing that the recession and lack of proper economic policies affected marketing communications practitioners and consumer habits

From all indices, Nigerian consumers and marketing communications practitioners, who provide marketing services for local and multinational companies, have not had it so good in the last two years of President Muhammadu Buhari – led administration.
As a result of heavy drop in disposable income, consumers were compelled to stay glue to a strict scale of preference.
According to the former Managing Director, Nielsen West Africa, an international research agency, Mr. Lampe Omoyele, the research carried out by the firm revealed that consumption of fast moving consumer goods (FMCG) product practically began to decline in the early days of the administration.

‘’What happens is that when consumers’ confidence begins to decline, people begin to look at reprioritisation of what they spend their money on, and with inflation and consumer disposable income not increasing, what you are finding is that people are spending more money in education and housing and then having less disposable income to spend on branded items,’’ he said.

Budgets cuts
For marketing communications practitioners, the story is the same because they thrive on good economy and when recession sets in, marketing naturally becomes the first casualty as most companies would be forced to cut their budgets. This has been the situation in the last two years. As a result of this, scores of companies have closed their offices while the existing ones are only struggling to survive.

During the last business session of the Association of Advertising Agencies of Nigeria (AAAN), held in Uyo, Akwa Ibom State, members of the association opened up on their challenges and the fact that many advertising agencies have closed their businesses in the last two years because of lack of account to survive on.

According to the association, registered agencies that have been delisted from AAAN list because they couldn’t meet their outstanding financial obligation are; 24-7 Communications Limited, Comex Limited, Grant Advertising Limited, Media Plus International Limited and Adpure Limited. Others are BTAS Communications Limited, Novitas Limited, Sloane Communications Limited, Pemetad Limited, Elsia Communications Limited and Platform Branding Limited. The rest are; Campaign Palace Limited, Alder Media Limited, Angels Communications Limited and Explicit Communications Limited. The number of the delisted agencies is said to have increased.

THISDAY findings have also revealed that most of the existing advertising and PR agencies in Nigeria have reduced their staff strength by over 50% for lack of business.

This becomes the lots of the practitioners because their success is determined by the happenings in other major sectors of the economy, especially manufacturing. In Nigeria, things are not looking up for local and multinational companies and this has dealt a blow on the marketing communication industry.

To this end, marketing communications practitioners have used many fora to express their worries about how consistent shrink in marketing budget is killing their businesses. At the maiden edition of the Marketers’ Conference organised by the Advertisers’ Association of Nigeria (ADVAN) in Lagos, business owners were urged to involve in more engagement. This was also the situation at a roundtable meeting of the Public Relations Consultant Association of Nigeria, where practitioners spoke glowingly on how Economic recession is affecting Public Relations.

Reasons for marketing decline
Despite the drop in oil revenue, marketing communication practitioners still had hope when Buhari was sworn in two years ago. The administration’s brand promise that was cleverly weaved around ‘change’ fired up the hope in the practitioners. Another thing that encouraged agency owners was the promise that the administration would control waste in the public sector and increase capital expenditure.

The first signal that things would not be as easy as assumed was the long time it took the administration to form a cabinet. For months Nigerians waited in limbo to see the list of cabinet members who would design policy direction for the new government. After ministers were eventually appointed, the passage of the 2016 budget became another subject of controversy. Again, for months, Nigerians waited in vain until the list was finally out.

However, what appeared to be the last straw that breaks the camel’s back was the foreign exchange volatility that practically frustrated the efforts of many companies in the country as most manufacturing companies could not access raw material. As a result of this, it was difficult to engage Advertising or PR agencies.

A former president of AAAN, Mr. Kelechi Nwosu, admitted when he spoke to THISDAY that things have been difficult in the last two years for practitioners.

“Our clients are majorly in the manufacturing sector and things are not easy for them. Our industry has recorded low performance more than any year in recent time because marketing budget has suffered. Manufacturing companies are not sure of getting raw material and they are not sure of whether they would sell because consumer’s confidence has nose-dived. When they are not sure of what to sell, why should they engage ad agencies? It is a simple Economics –you don’t supply when there is no demand. Another critical issue is that there is no government patronage. In most countries, the major chunk of advertising revenue comes from the government but in Nigeria, things are different. Finally and one instructive thing; decline in GDP will always affect marketing budget and every other things we do.”

Another issue that appears to have also affected the marketing communication industry is lack of proper marketing of Nigeria and her potentials by President Buhari and his Information Minister, Mr. Lai Muhammed. At every opportunity, within and outside Nigeria, the duo present Nigeria as a bad product and this, according to experts, is scaring investors.

Another former President of AAAN and Managing Director of SO&U, Mr. Udeme Ufot, while reacting to this said: “There is nothing Nigerians enjoy more, both the lowly and the highly placed, than to denigrate their nation, even in the midst of foreign audiences, laying before them all our dirty linen. As marketing communicators, you would obviously feel scandalised if the marketing director of a brewery consistently tells whoever cares to listen how bitter the beer he sells is, how overpriced it is and how it is no better than other beers, you would be even more shocked if he proceeds to warn you that you could become an alcoholic if you start drinking beer, and how better off you would be saving money for your family’s upkeep and investments than buying beer.

“It may sound extreme, but that is what our chief marketing officers do to our country sometimes, not because they do not love their country, it is just that they do not understand the full implications of their utterances as it impacts the image of their country,” Ufot stated.

Consumer index
Measuring 120 points in Q1 2016, Nigeria’s consumer confidence is reported to have dropped to its lowest levels in about two years according to the Consumer Confidence Index released in May 2016 by Nielsen, a global information & measurement company.

The report stated that confidence levels in Nigeria dropped by seven index points from Q4 2015 as FX challenges – Naira Depreciation, Higher Energy & Food costs drove Inflation to a 4-year all-time high of 13.7%; negatively impacting consumer disposable income and spending intentions.

Meanwhile, in the last two years, the confidence level of consumers in the economy has witnessed a downward slide amid rising cost of living and prices of basic goods including foodstuffs. The global performance management company that provides a comprehensive understanding of what consumers want to buy had confirmed earlier that consumer confidence in Nigeria dropped in the fourth quarter of 2015.

The analysts noted that Nigeria’s Consumer Confidence Index for the fourth quarter of 2015 dropped to 100 points from more than 120 points recorded earlier. The CCI is an indicator designed to measure consumer confidence, which is defined as the degree of optimism in the state of the economy that consumers are expressing through their activities of savings and spending.

But according to Omoyele, the country’s CCI was very high before 2015.
He said: “While Nigeria has always been very high and the highest in Africa, we were concerned when, for the first time in quarter three of 2015, there was a decline in the points. So, while it was still over 100, it had declined and this was driven by a number of factors: the inflation and other macroeconomic issues and the oil prices. The non-approval of the budget had a lot of impact because wages were static; some were cut. So, consumer disposable income had declined. While ours was still high in relation to other markets in Africa, the concern for us is that it was declining,” he said.

Given the declining condition of the outlook for many consumers; they are expected to re-prioritize spend to survive the times. The impact of this is already being seen with decline in consumption of many FMCG categories.
To win, FMCG players must strive to position themselves to consumers as offering the best “value” for their products in terms of pricing & packaging. Driving availability, awareness and trust would equally be critical

APCON dissolution
Another reason stakeholders cited for slow activities in the marketing communications industry was the sudden dissolution of the Advertising Practitioners Council of Nigeria (APCON) board along with other government parastatals by the president. Two years after, the body that is saddled with the regulation of the entire industry is yet to have a board. For a council that was just coming out of crises when Buhari assumed office, following the imposition of a non-professional in the person of Prince Ngozi Enioma as the APCON Chairman, by the former President Goodluck Jonathan, many expected a better regime under Buhari. But the sudden ban of a newly constituted council led by Udeme Ufot, a thorough-bred advertising man was considered a setback for the industry.

As at the time Ufot came in, it was expected that regulation, especially as it concerned the recent industry reform would get good attention, which probably would have aligned with the ‘change’ mantra of the Buhari’s administration. Unfortunately, the sudden ban of the council scuttled this, and killed the hope of many practitioners, who had earnestly waited for the implementation of the long-awaited advertising reform. Meanwhile, there is a pending clog in the whole process over the belief in some quarters that government made a mistake, while the late Prof. Dora Akunyili was Information minister, to have wrongly listed APCON as a parastatal instead of being treated as a regulatory body.

To say this is not the best of times for players in the industry is like stating the obvious. Now that marketing has naturally become the first casualty of the current economic recession, stakeholders are calling on President Buhari to give his policy a human face. Though his fight against corruption is applauded in many quarters, many marketing communication practitioners have faulted it on the basis that it is scaring away investors.

“The hype in our fight against corruption is more than the substance and this is not good for our image as a nation, we are simply telling the rest of the world that, go, go we are thieves. New businesses are not coming in and the existing ones are cutting down the budget. As I talk, most agencies are downsizing, throwing more people into the labour market,” a concerned practitioner said.

Meanwhile, the Publicity Secretary of the Media Independent Practitioners Association of Nigeria, Mr. Yinka Adebayo, has urged the current administration to give marketing communications professional good recognition.

“I can only advise government to build on what was achieved during the electioneering campaigns when most of them engage professionals to handle their campaigns. By the recent statistic, our industry now worth N120 billion and about 80 percent of this is contributed by registered media independent firms. With this, I think the industry is critical to the economy and so government should endeavour to give us more recognition,” he said.

CPC’s redress of N2.5bn
However, if there is any plus for the administration it is in the area of protection of consumer rights. In December last year, the Consumer Protection Council (CPC), disclosed that it has ordered redress up to the tune of N2.5 billion for consumers in 2016 as refunds and compensation in the resolution of their complaints on unsatisfactory services and products.
The Council’s feat was made known in Lagos during the public presentation of the agency’s 2016 Annual Report by its former Director General, Mrs. Dupe Atoki.

The Director General disclosed that the N2.5billion included foreign currencies of $31,948.87 and €1,406 recovered for aggrieved consumers, who complained to the Council. According to her, financial services recorded the highest value of the total amount, while insurance and pensions had the least value.

She stated further that out of the 5,000 total number of complaints received in various sectors, 4,000 were resolved, while electricity/power and chemical and allied products sectors had highest and least number of complaints respectively.
Atoki disclosed that under enforcement, the total value of substandard products removed from Nigerian markets was over N242.3 million with food and beverages taking the lion share of over N200 million and tobacco with the least value of about N300,000.

Further breakdown of the value of seized products showed that substandard products worth over N202 million were seized from malls, super and open markets, shops and warehouses, while the value of electrical and electronic products seized during the period is N40 million.

Expectation
For the communication industry to harness its potential in the years ahead, experts have advised the administration to constitute the APCON council as well as increase the budgetary allocation meant for the council.
Few months ago, stakeholders had thought things might look up for the Advertising Practitioners Council of Nigeria (APCON), in the area of funding, when the Senate Committee on Information promised to pursue the possibility of increasing the budgetary allocation meant for APCON

Chairman, Senate Committee on Information, Senator Suleiman Adoke, who led other committee members to APCON Secretariat in Lagos, expressed concern over the way the council is being starved of fund. He advocated for an increased budgetary allocation for the regulatory body to enable it meet and deliver on its mandate as an industry watchdog, and also carry out more research into the sector. Till date, nothing has been done to jack up the allocation and no sign that the council will be reconstituted soon. Until all these issued are addressed, the council will continue to bleak in the dark.