Shrinkflation occurs when the price of a product stays the same, but its size gets smaller. In economic terms, this describes companies increasing the price of a product while reducing the quality or volume of the product that consumers receive compared to the previous amount. It is one of the many ways companies attempt to hedge against losses in a volatile economy. Does this sound familiar?

During the last few years of Buhari’s disastrous administration, Nigerians have experienced shrinkflation, whereby the size of the products is reduced, but the prices remain the same. Manufacturers are taking this action to cope with the damaging effects of hyperinflation, which has plagued Nigerian producers and consumers for years due to multiple factors ranging from high energy prices (diesel) to poor transport as well as direct and indirect bottlenecks imposed by government agencies.

For anyone who eats biscuits (or has children who do), the effect of shrinkflation has been very obvious and damaging. The sizes of all major biscuit brands below N200 per pack have reduced, but they retained pre-inflation prices as manufacturers deal with the effect of energy and raw material inflation, which negatively affects their bottom line. What is responsible for this?

Energy costs

In April, Nigerians experienced an irritating but regular occurrence in the country’s electricity infrastructure: the dreaded Grid Collapse. At 2:00 a.m. on Monday, 15th April, Nigeria’s national electricity grid collapsed, plunging the nation into a total blackout. According to the Transmission Company of Nigeria (TCN), the four-generation companies recorded 0MW generation around the time of the incident.

Nigeria’s grid issues are compounded by the fact that for a population of over 200 million people, Nigeria’s weekly grid performance averaged just over 4,000 MW as peak performance. In reality, this production is just enough for a population of 5 million people. This shows that manufacturers cannot rely on the grid to produce and process food, so they must rely on alternative energy sources,  mainly diesel.

The NBS, in its Diesel Price Watch for March 2024, revealed that the average retail price of diesel paid by Nigerians increased by 59.51% on a year-on-year basis. This increase is from a lower cost of N840.81 per litre recorded in March 2023 to a higher cost of N1341.16 per litre in March 2024. “On a month-on-month basis, an increase of 6.69% was recorded from N1257.06 in the preceding month of February 2024 to an average of N1341.16 in March 2024”, the report added  The above are further indications that Nigeria’s inflation will not stabilise anytime soon, and this affects processed food as manufacturers would need to “adjust” to reality at the expense of the nutritional value of the consumer, especially the Nigerian child.

A cursory look at diesel shows that in states with manufacturing capacity (Lagos, Ogun, Oyo), including the FCT,  all recorded diesel costs above 40% YoY, with Nigeria’s food belt (Niger and Benue) also recording large Year-on-Year price increases. This is just one of the major indicators contributing to the shrinkflation of processed food needed in Nigeria.

Wheat Prices

As Nigerian producers deal with the effects of rising energy costs, they also have to grapple with increased raw materials for making processed food. Food producers are battling an 82.61% cost increase in wheat alone from February 2023 to February 2024. This means that the average Nigerian biscuit/cookie-making facility in Lagos has experienced an over 40% increase in energy costs and an 82% increase in raw material costs in one year. This also accounts for the fact that recent estimates have seen Nigeria’s GDP per capita fall below $2000 at the beginning of the year.

These numbers signify that Nigerian food processors' only option is to shrink the size of produced food. Doing so poses a nutrition challenge for Nigerian children below the age of 10, which means less nutritional value, including calories, carbohydrates, fats, sugars, and micronutrients—a recipe for disaster.

Malnutrition

In its Nutrition Strategy 2020-2030, UNICEF noted that, as of 2020, at least one in three children do not achieve optimum growth due to malnutrition, and at least two in three are not fed the minimum diet they need to grow, develop, and learn to their full potential. 

They added that this hurts not just children but everyone as the burden of undernutrition and micronutrient deficiencies remains unsolved, particularly in low and middle-income countries, where about 200 million children are affected by stunting or wasting and almost twice as many suffer from deficiencies in vitamins and other essential nutrients.

The report noted that UNICEF State of the World’s Children 2019, Food and Nutrition, indicates that at least one in three children under five are undernourished (stunted, wasted, or both) or overweight, and at least half suffer from deficiencies in essential micronutrients. 

They added that 144 million children under five—are stunted, citing that in South Asia and sub-Saharan Africa, stunting affects one-third of children under age five; the report also noted that 32.7% of stunted children live in West Africa, adding:

• “About half (54 per cent) of all children who are stunted live in Asia, and more than one-third(40 per cent) live in Africa. Ninety-one per cent of the children who are stunted globally live in low-income and lower-middle-income countries (27 and 64 per cent, respectively).”

The report also acknowledged that governments have the primary responsibility of upholding children’s right to nutrition. It urged that the path to nutritious diets, essential nutrition services, and positive nutrition practices for all children, adolescents, and women demands a shared purpose, with commitments and investments required from a range of government, societal, public, and private partners.

Bottomline

The NBS recently reported that in March 2024, Nigeria’s food inflation rate reached 40.01% year-on-year, marking an increase of 15.56 percentage points from 24.45% in March 2023. Rising prices for items such as garri, millet, and akpu (all part of the bread and cereals category) and yam tuber, water yam, and others are attributed to rising prices. 

For the twelve months ending in March 2024, the average annual food inflation rate was 31.40%, an increase of 8.69% from the 22.72% recorded in the previous twelve months ending in March 2023. These numbers are an indicator Nigeria cannot ignore as they mean fewer healthy children.

This indicates that Nigeria would need more than UNICEF’s intervention to fight childhood malnutrition. Failure to tackle issues that disrupt food production, including insecurity, improved yields, and road transport, shows Nigeria would remain a major contributor to stunted children statistics globally.

The report highlights a challenge currently facing the Nigerian government regarding malnutrition and warns that governments must strengthen the capacity and accountability of five key systems: food, health, water and sanitation, education, and social protection, which are essential in the fight against malnutrition. 

On the qualitative side, the  Nigerian government must also regain the political will to see malnourished children as a national emergency.

References:

Nigeria grid collapses again plunging Nigeria into total darkness, nairametrics: https://nairametrics.com/2024/04/15/blackout-national-grid-collapses-again-plunging-nigeria-into-total-darkness/ 

Nigerian National Grid Checker: NiGGRID: https://www.niggrid.org/ 

Nigeria Automotive Gas Oil (Diesel) Price Watch (March 2024), NBS https://nigerianstat.gov.ng/elibrary/read/1241490 

Selected Food Prices Watch (February 2024), NBS: https://nigerianstat.gov.ng/elibrary/read/1241477 

UNICEF Nutrition Strategy 2020-2030, UN: https://www.unicef.org/media/92031/file/UNICEFNutritionStrategy2020-2030.pdf 

CPI and Inflation Report March 2024, NBS: https://nigerianstat.gov.ng/elibrary/read/1241484