Effect Of Recession On The Price Of Consumable Goods In Nigeria
It is pertinent to say that the objective of this study is on the effect of recession on the price of consumable goods. Pricing and its increasing or decreasing is currently confronted not only by, the state of the economy, but also by importation, exportation and internet trade expansion. Information flow through internet networks presents opportunities of cutting costs, speed up production or supply of goods and services. At the same time it increases uncertainty rate and risk, which consumers and producers have to face. Price and pricing policy becomes part and parcel of everyday sales management, retail chains and networks around the world.
1.1 Background of the Study
Increase in prices of consumable goods and basic necessities of life due to inflation, unemployment, and low GDP creates a pre-recessionary situation which slowly and gradually affects the buying behavior of consumer of every market. Any nation going through the period of recession faces not only an internal resistance from its business sector and but also an external pressure from foreign bodies too. It becomes almost impossible for low income family to fulfill their basic requirements of daily life. Families with an average monthly income becomes hand to mouth and savings are almost impossible. Whereas families having earnings of more than one family member, tries to limit their budget and go for more savings for future, as it becomes very un-predictable. In 2009, global real GDP fell by 0.7%, marking the first decline since the early 1930s and prompting some to compare the current crisis with the Wall Street Crash of 1929 and the Great Depression.
Although global GDP rose by 5.1% the following year, fueled largely by strong growth in developing markets, the world’s advanced economies continued to suffer from significant job losses, drastic cuts in consumer spending and private investment, as well as an alarming dip in global demand for consumer goods and services of all types. Growth is thought to have slowed to 4% in 2013, as consumer confidence remained low in the face of economic uncertainty Lekachman rejects the view of the economy as “an engine powered by uncovered inner motivated decisions of legions of ardently competing businessmen and hordes of their customers” and the contention that “success is ultimately related to individual merit and application”.
Consumer behavior is the study of when, why, how, what and where consumers do or do not buy the products. It has elements of sociology, social, anthropology, psychology and economics, marketing wherein understanding how and why people behave in different situations with same or different circumstances. The decision making procedure is subjected to various attitudes, and social influence on the purchaser. Buyer be likely to behave in certain manner including loyalty, habits, brand, and post purchase behavior. Economists officially define a recession as two consecutive quarters of negative growth in gross domestic product (GDP). The National Bureau of Economic Research cites “a significant decline in economic activity spread across the economy, lasting more than a few months” as the hallmark of a recession.
Both definitions are accurate because they indicate the same economic results: a loss of jobs, a decline in real income, a slowdown in industrial production and manufacturing and a slump in consumer spending – spending that drives more than two-thirds of the U.S. economy.
In the article we’ll explain how the impact of these broad-spectrum slowdowns on both large and small businesses can be very damaging, and in some instances, catastrophic. Some businesses may be affected only moderately, or not at all, if the recession is mild and brief. If the recession lingers and the downturn is widespread, all big businesses – firms publicly traded on major stock exchanges – may ultimately be hurt.
1.2 Statement of the Problem
Pricing policy should be based on business objectives of enterprise. The view of the enterprise economic objectives is internal and external. Internal view has to take into account sales adaptation of production conditions, effort of full production capacity utilization, full employment and full implementation of the optimal cost situation in the enterprise. Pricing policy is understood as a set of the state or enterprise measures in the field of prices. It is a part of state economic policy or enterprise business (Oláh et al., 2009). Currently, there are still many companies, which do not proceed with the best pricing. It is in view of this that prompt the researcher to investigate the effect of recession on the price of consumable goods
1.3 Objective of the Study
The main objective of this study is to ascertain the effect of recession on the price of consumable goods in Nigeria. But for the successful completion of the study; the researcher intends to achieve the following sub-objective;
- To ascertain the effect of recession on the price of consumable goods
- To examine the impact of recession on the price of consumable goods
- To ascertain if recession plays any significant role on the increase or decrease in price of goods
- To ascertain if there is any significant relationship between recession and the price of goods and services
1.4 Research Hypotheses
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
- H0: economic recession has no significant effect on the price of consumable goods in Nigeria.
H1: economic recession has a significant effect on the price of consumable goods in Nigeria.
- H0: there is no significant relationship between economic recession and the price of goods and services in Nigeria.
H2: there is a significant relationship between economic recession and the price of goods and services in Nigeria.
1.5 Significance of the Study
The study will be of great importance to the government of Nigeria as the study will help them to formulate policy that will aid productivity amidst recession. It will contribute immensely to the exploration of the effects that have led to the backwardness of industries in the area of study and suggested possible solutions to those effects identified and it will be of significant value to the three tiers of government which are federal, state and local in the allocation of resources so as to cater for potential and aspiring industries that are on the rise.
Furthermore, it will be of significance to manager existing and potential entrepreneurs and directors of subsequent industries in Nigeria. Knowledge about its significant finance will equip incoming and aspiring investors who tends to invest in the industrial sector so as to ensure efficiency and maximum prosperity towards development. The study will also be beneficial to researchers who intend to embark on study in similar topic as the study will serve as a guide to their study. Finally the study will be beneficial to academia’s students and the general public.
1.6 Scope and Limitation of the Study
The scope of this study covers the effect of recession on the price of consumable goods in Nigeria. But in the cause of the study the researcher encounters some constrain which limited the scope of the study;
Availability of Research Material:
The research material available to the researcher is insufficient, thereby limiting the study.
The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover
1.7 Definition of Terms
Oil glut simply refers to a situation where there is excessive supply of oil by the various oil producing in a countries.
Economic recession is a period of well lightening a period that is characterized by drastic cut down on aggregate demand for goods and services.
These are materials needed by new and existing industry to have effective and smooth running of the firm in order to ensure maximum profit and the firms actualizing it’s objectives.
It simple means the manufacture outputs (goods and services)
1.8 Organization of the Study
This research work is organized in five chapters, for easy understanding, as follows
- Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
- Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature.
- Chapter three deals on the research design and methodology adopted in the study.
- Chapter four concentrate on the data collection and analysis and presentation of finding.
- Chapter five gives summary, conclusion and also recommendations made of the study
Summary, Conclusion and Recommendation
It is important to ascertain that the objective of this study was to ascertain the effect of economic recession on the price of consumable goods in Nigeria.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the effect of recession on consumable goods.
Recession is a business cycle contraction, referred to as a general slowdown in economic activities. During recession, there is usually a decline in certain macroeconomic indicators such as GDP, employment, investment spending, capacity utilization, household income, business income, and inflation, with attendant rising unemployment rate. Recession could be caused by two broad factors: internal (endogenous) and external (exogenous), and that recession has impact on the economy through its effect on business, financial markets, stocks and dividends, product quality, credit conditions and socio-political structures. Instruments of monetary and fiscal policies can be used to counter recession and bring about economic growth. Monetary authority can pursue accommodating/easy monetary policy to stimulate economic activities. This is a situation where monetary authorities lower the cost of credit. This can be achieved by lowering interest rate, and lowering of eligibility conditions for banks to access the monetary authority’s window. When monetary authority lowers interest rate, it is to encourage individuals and businesses to borrow more funds to finance consumption or expand productive capacity. Individuals and businesses pay less interest on borrowing thereby making it possible for them to repay the interest and the principal amount borrowed.
When consumption increases, companies produce more, hire more workers and buy more raw materials for production, and in the process stimulate economic activities that would end recession. At other times, monetary authority can also embark on unconventional monetary policy or quantitative easing (use of things other than interest rate and market forces to affect money supply) to stimulate the economy. This is done when monetary authorities inject money into the banking system to shore up banks‟ balance sheet or by buying government securities from the secondary market (market where securities like bonds are traded), thereby injecting money into the economy to stimulate activities. Fiscal authority can pursue loose fiscal policy to bring economy back to growth from recession. Government can lower taxes on individuals and businesses thereby freeing additional resources to the household and businesses for consumption and investment. Another instrument at the disposal of government is to increase their spending in real activities during recession to bring about growth. When taxes are lowered for individuals and businesses, extra money is madeavailable for consumption or investment. If consumption rises, businesses spend more to produce additional goods and services, which would result in more employment and results ultimately in increased economic growth. Government could also embark on essential structural reforms in order to improve transparency and stability of both financial system, and fiscal activities to restore confidence in the economy during recession.
The purpose of the study was to understand the effect of economic recession of 2015 on the price of consumable goods in Nigeria. The customer’s buying behavior is conditioned by his/her purchasing power. This purchasing power took a huge downturn due to increasing inflation and decreasing incomes in the year 2015. To conduct the research, a questionnaire administered survey has been conducted among 200traders and market women in Nigeria and the data revealed that with less money in hand, the consumer preference towards necessities increased whereas purchase of luxury items decreased, with an exception on consumable goods. In times of hardships, the branded products lost their cause to prices with people turning towards inferior quality products.
The following recommendations were made based on the findings of the study: Federal government must see that the price of crude oil is gear up in the world market. Both local and external investors must be encouraged to invest in Nigeria. Agriculture farm settlements must be revived by government in the rural areas. Consumption of locally produced goods andservices must be encouraged. Government at all levels must provide enabling environment for domestic investment in terms of loan grant to local investors , provision of adequate infrastructural facilities, organizing entrepreneurial skills training, market for locally produced goods etc.
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