Nigeria’s inflation has been rising over the past few years, currently reaching 34.19 per cent, a surge of 11.40 percentage points compared to the 22.79 per cent recorded in June 2023.
As the inflation rate continues to soar, consumers are likely to encounter new challenges in their everyday purchases.
Two significant trends, shrinkflation and skimpflation, may emerge as companies adapt to rising costs. Shrinkflation, where product sizes decrease without a corresponding price reduction, and skimpflation, where the quality of products or services diminishes, might become increasingly prevalent across various industries.
According to the National Bureau of Statistics (NBS), as of June 2024, the headline inflation rate increased to 34.19 per cent.
This showed a notable increase in the average price level over the previous year, rising by 0.24 percentage points year over year from the 33.95 per cent recorded in May 2024 and by 11.40 percentage points from the 22.79 per cent recorded in June 2023.
To the British economist, Pippa Malmgren, who coined the term "shrinkflation," it is a form of hidden inflation imposed on consumers by manufacturers.
The most typical products to experience shrinkflation are ordinary consumer goods, especially food and beverage items. Goods including bread, cereals, snacks, and dairies are frequently prone to shrinkflation.
Packing sizes for household products like detergents, toiletries, and cleaning supplies gradually get smaller over time.
Skimpflation, on the other hand, is common in certain consumer goods and services. For instance, while maintaining the same rates, hotels and restaurants in the hospitality sector may reduce the quality of their services or portions while keeping prices constant.
A news report in 2021 found that a pack of Coaster Biscuits originally contained seven pieces, but over time, the number of pieces decreased, with each piece growing thinner until the company ultimately decided that three pieces were sufficient for consumers, at the same price or higher.
This reduction was accompanied by a price increase. Initially, a pack of seven Coaster Biscuits was sold for N5 but was later sold that year for N10 a pack of three biscuits.
Despite fluctuations in Nigeria’s inflation rate during the 2021 period, the declines were not significant enough to alleviate the deteriorating economic conditions.
This example illustrates shrinkflation and an eventual increase in price.
An example of skimpflation is the change in ingredients by Tesco, a British multinational grocery retailer, which made changes to its products, cutting the meat content in its "Tex Mex" chicken enchiladas from 27% to 20%, and reducing the pork content in its Finest sausages from 97% to 90%.
Although shrinkflation and skimpflation are not officially tracked by the National Bureau of Statistics (NBS), the high inflation rate of 34.19% in June 2024 suggests that manufacturers are likely under pressure to control prices, often leading to these practices.
Some fast-moving consumer goods (FMCG) companies bowed out because of the inflationary pressure. Within one year, 11 major foreign companies have ceased full operations in Nigeria due to external price instability (exchange rate fluctuations), inflation, and other prevailing macroeconomic conditions.
As Nigeria grapples with persistent inflation, global inflation has also surged in recent times, putting consumers worldwide at risk of both shrinkflation and skimpflation.
According to the 2023 Ipsos Global Inflation Monitor, nearly half (46%) of consumers across 33 surveyed countries reported noticing that product sizes are becoming smaller while prices remain the same.
Global Experience with Shrinkflation, Skimpflation and Inflation
Source: IPSOS
According to the survey, savoury snacks like chips, crisps and pretzels are the most frequently reported items to experience shrinkflation, with chocolate and sweets coming in second and third, respectively, as the products get smaller while maintaining the same price.
Why is Shrinkflation and Skimpflation More Likely?
Shrinkflation and skimpflation are signs of Nigeria's severe inflationary pressures. Consumers are the ones who suffer the most from these small but important shifts as firms fight to control expenses in a difficult economic climate.
A report by Dataphyte indicates that fluctuations in the exchange rate are closely linked to the three types of inflation, while changes in petrol prices have minimal or no impact on inflation. Higher forex rates lead to increased costs for food imports, which in turn drive up selling prices.
Additionally, the devaluation of Nigeria's currency encourages local farmers and middlemen to export agricultural products to neighbouring countries where they can obtain revenue at more valuable currencies.
This practice reduces the local food supply, driving up food inflation and, consequently, headline inflation. Food inflation contributes more to Nigeria’s headline inflation, according to the NBS.
Reduced consumer confidence, a drop in living standards, and increased economic inequality are possible long-term effects of these activities.
Solving Shrinkflation and Skimpflation
Experts advise paying close attention to product details such as size, weight, and quantity is the quickest way to detect shrinkflation and skimpflation.
If you notice that a product’s quantity or quality has been downsized, switching to competing brands is one effective way to avoid the effects of shrinkflation and skimpflation. This alternative may have yet to undergo downsizing, allowing you to get more value for your money.
Another alternative is to concentrate on the unit price, which provides a clearer view of the actual cost. Bigger amounts sometimes have a lower unit cost, purchasing in bulk can often reduce the consequences of shrinkflation.
Modifying your purchasing patterns may also have an impact. For example, purchasing non-perishable goods in bulk may help you avoid the effects of shrinking sizes, and looking into alternatives may help you find goods that better suit your needs without compromising on quantity or quality.
Voicing your concerns about the modifications as a customer and providing the manufacturer or retailer feedback. Businesses frequently take customer feedback seriously, so your suggestions may have an impact on upcoming product choices.
This strategy helps ensure that you continue to receive the full worth of what you pay, even as other products reduce in size or quality.
Thanks for reading this edition of Pocket Science. It was written by Khadijat Kareem and edited by Oluseyi Olufemi.