There are two ways providers of goods and services can respond to the near-apocalyptic economic conditions in which the country currently is. Well, there are three ways. First? Close shop. Hardly sensible. I doubt if businesses see this as an option until they just cannot go on.
One of the more sensible is to, as input/operational costs soar, retain prices/implement marginal increases and lower the goods/services quality. This, of course, sparks discontent. It just lacks the action-hero energy that customarily attends upward price reviews. The makers of a famous sausage brand, as operational costs keep rising, have kept reducing the size of the product and, of course, the filling. They have kept the price or adjusted it a little.
But customers are no mugs. They know that what they now are getting as the product is an apparition; a shell of what it was. It’s shorter, slimmer and has colouring where it used to have beef. Does the customer still get the same value? Of course not. Is the brand still the hot number it was? No.
The other is to adjust prices to be economic situation-reflective and enough to maintain quality of goods/services. This, naturally, gets most customers in an almighty fit. Only the wealthy are indifferent to upward price reviews, treating them like water on a duck’s back. The rest of us would weep, wail and moan like an immigrant facing deportation.
In the last few days, wailing, moaning and gnashing of teeth are what we have done since pay television company, MultiChoice Nigeria, announced new prices for its services effective 6 November. Even at the best of times, MultiChoice’s price adjustments seem to rankle more than anyone else’s. And these, definitely, are not the best of times, especially in view of the car crash the economy is and the fact that this is the second tariff adjustment exercise this year.
Since the announcement on Wednesday, social media platforms have been tutting and frothing with indignation. Understandably. Price increase is no picnic. Customary accusations of exploitation, monopoly, blunt refusal to implement Pay Per View or Pay as You Go or pay as whatever have been dug up (they are not buried deep, anyway) for use.
Not central to this piece but worth mentioning is the fact that StarTimes, another pay television provider, has increased prices the same number of times as MultiChoice this year. It did in May and September. But for reasons I cannot claim to know, it was not talked about at all. As stated before, it is not central.
The Chinese-operated provider’s reasons for adjusting prices for the second time this year were the same as the first time. It stated that it was hiking prices to reflect economic realities, listing factors such as inflation and Naira devaluation among others. MultiChoice had hung its price adjustments in May on almost the same factors. What options are available to MultiChoice or any other business for that matter, given the impact of government economic reforms in the last five months?
According to the National Bureau of Statistics (NBS), inflation in September rose for a ninth straight month from August’s 25.8% to 26.72%, the highest in two decades. On a year-on-year basis, the inflation rate was 5.94% higher than when compared to the 20.77% in September of 2022. Food inflation, the main component in the country’s inflation basket, rose to 30.64% in September from 29.34% in August. This followed the removal of petrol subsidies that tripled prices and allowed the Naira to depreciate more than 50%. Consumer prices have simply gone into the stratosphere.
Economic analysts are of the view that Naira depreciation, higher energy and food prices as well as logistical costs, are some of the key drivers of the country’s inflation. Businesses that heavily rely on foreign exchange, as pay television does, have been directly impacted by the steep slide in the value of the Naira. The costs of content acquisition and satellite, including that of up-linking free-to-air (FTA) channels have inevitably risen on account of the dire fortunes of the Naira against the Dollar. What shield does MultiChoice have against these costs? None. It is the same way every business within the same sector and outside of it is unprotected.
Those who run airlines, for example, keep adjusting prices. As at last year, a one-hour flight cost N50,000. The price is nudging N100,000 now.
Three years ago, a litre of diesel cost N224. By the first quarter of last year, it had jumped to N650 per litre, with the latest devaluation of the Naira pushing its price to N1,200 per litre. The country’s inflation has risen to double-digits since 2016, eroding incomes and savings of individuals and businesses.
There is no bigger victim of the cost-of-living crisis between the business and the consumer. MultiChoice, StarTimes and every other business that has increased rates or prices are simply responding the way businesses respond to prevailing macro and micro-economic conditions. Of course, those who run them know they could suffer reduced patronage. The alternative, not appealing, is to launch a subsidy regime. What business would do that when even the government scrapped its subsidy of petrol? None.
Olonisakin writes from Ibadan