N100 Naira Flip – Why Below $1 Is Sweet Pricing Spot for Most Consumer Products in Nigeria

N100 Naira Flip – Why Below $1 Is Sweet Pricing Spot for Most Consumer Products in Nigeria

You have launched that service/product in Nigeria, and all the models are falling off. Just because of extra N100 ($0.30), no one cares to experience that great service you are bringing. Yes, for many, saving $0.30  is exceedingly important because times are hard. In my model, I expect just about 32 million to be earning income in Nigeria. These 32 million will support the other 170 million people. Because the incomes most of these 32 million earn are severely out of livable wage variance, they have no room for extracurricular living styles. Your premium, comfort, etc experiences are nonsense: man (woman) wants to just survive today.

In Nigeria, only 17 million people were paying taxes when I first put my piece [it is now 19 million using latest data]. I believe the informal sector players do earn income even though most do not pay taxes to government – I estimated the non-paying tax number to be 13 million to arrive at 30 million. Also, if you look at the number of bank accounts in Nigeria using the bank verification number (BVN), you will be in the neighborhood of 35 million. While not everyone that has a bank account earns wage, there is a very huge overlap that the 30 million makes sense.

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Yet, my model is not really about the number of people on paid employment, rather the cohort within the addressable market for mostly non essential items. So, food and medicine will always have the full population of 200 million as target market while non-essentials like movie streaming can only attract from the 30 million. With government bringing extra 2 million people into the tax-fold, I can update that 30 million to 32 million people now.

Pricing is everything in Nigeria. And if you get it right like Bigi Cola and Indomie noodles, you will find market glory. Any mass consumer product that costs more than $1 in Nigeria would struggle to thrive because if most people earn $3 daily, it does not make sense to put $1 in one product (our minimum wage for federal workers is $2.7 per day). Check Indomie, Bigi Cola, Ariel, and many successful brands, you can always get them with less than $1 in one way or the other.

So, how do you do it? You break the package, making it easier to reach more people. In transport, eating mama put, and practically anything, do not neglect the delta of $0.30. It is this mass challenge that makes lending startups coming up well; people need their services irrespective of the rates (see this nice table from Techcabal)

During the Tekedia Mini-MBA, our experts would be explaining how to win in markets through efficiency on pricing and other elements. Register today.

Lending Rates in Nigeria (source: TechCabal)

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One thought on “N100 Naira Flip – Why Below $1 Is Sweet Pricing Spot for Most Consumer Products in Nigeria

  1. Rather than focusing on how to squeeze the already malnourished population further, we should rather focus on moving more people into the upper middle-class and millionaire brackets; that is the only thing I consider sustainable. Our minimum wage is nothing, so we do not need to have many people within that bracket, let alone building any business with them in mind.

    There’s really no ingenuity in trying to get a cut from a cake that is already small, rather we must deploy that creativity and talent into baking a bigger cake, giving couple of millions of people more some opportunity to get a cut.

    Only massive investment across board can make such dream a reality, a malnourished cow has severe limitations in the quantity of milk it can give out; the economy needs to grow!

    You cannot build any modern innovative business on the back of people whose preoccupation is food and medicine, you must first get them out of that hole, before meaningful things can be experienced here at scale.

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