Unilever Overseas Holdings acquires N352 million worth of shares of Nigerian subsidiary
Elon Musk to offer $100 million prize for best carbon capture technology
WHO warns Africa in danger of being left behind in Covid-19 vaccination
Unilever sets out plans to help build a more equitable and inclusive society
FG gives reasons for sale of government assets to fund 2021 budget
Bitcoin posts biggest daily drop since market crash of March 2020
Nigeria records $4.3 billion in Corporate Deals in 2020
FG says Excess Crude Account balance now stands at $72.4 million
CBN has disbursed N14.35 billion to DisCos for meter procurement – FG
Naira gains marginally at NAFEX window, exchange rate to remain stable
Reviews
Product Review: The Nigerian Cigarette market has only one winner
Figures from the World Health Organization show that over 1.1 billion people light up cigarettes worldwide
Figures from the World Health Organisation (WHO) show that over 1.1 billion people light up cigarettes worldwide. By implication, more than 1/6 of the world’s total population is addicted to smoking, including tobacco’s main component – nicotine. Tobacco companies produce trillions of cigarettes sticks annually, and the consumption rate keeps increasing across the globe.
In Nigeria, despite the age restriction and government regulations that forbid smoking in public places, manufacturers have continued to churn out new cigarette variants to further appeal to the emotions of their expanding consumers. The increase in demand by Nigerian consumers is boosted by the growing population, urbanisation, and westernisation.
Cigarettes come in blends of tobacco encased in paper, glue and also with cellulose acetate-based filters. The tobacco utilised in numerous cigarette brands includes more than one hundred substances, like additives and diverse flavourings.
Welcome to this week’s edition of product review, a weekly analysis where Nairametrics features products contending for leadership and prominence in Nigeria’s consumer market. This week, we take a look at the cigarette brands and how they are competing for profitability and visibility in the market space.
Facts and Figures
In a report by GulfTobacco.com, Nigeria produces an average of 19-21 billion cigarettes annually. It also revealed that on average, just one person smokes 162 cigarettes annually in Nigeria.
A Nairametrics research as at 2016 suggests that about 21 billion sticks of cigarettes were produced in the country. While 12 billion of these sticks were sold in Nigeria, the rest were sold in West African markets.
Brands in the market
Major brands in the Nigerian market include Benson & Hedges, Rothmans, St Moritz, Aspen, Pall Mall, and London. The Nigerian market is dominated by British American Tobacco (BATN) which controls over 78% of the market share and closer to 82% of the West African market. The reduction in illicit trade of cigarettes has also helped it to solidify its leadership position. The company’s range of brands is very strong and BATN is probably the only company to have a complete presence across the length and breadth of the country.
However, over the last five years, the company’s sales share has fallen, particularly due to competition from brands offered by multinational, Japan Tobacco Inc. (manufactured in Nigeria by International Tobacco Co Ltd).
Philip Morris Limited, maker of Marlboro and L&M brands, recently entered into a strategic partnership with International Tobacco Company for the local manufacturing of the products in Nigeria.
SWOT Analysis of the market
Strength
The increasing population and growing socialisation culture among adults offer a good market for cigarettes in Nigeria. Though the industry is highly regulated – the National Tobacco Control Act 2015 was signed into law by the last administration in 2015. The law provides an effective regulation and control of production, manufacture, sale, labelling, advertising, promotion and sponsorship of tobacco products in Nigeria.
Weakness
The Nigerian market is prone to strict government regulation. Recently, in its bid to discourage people from smoking, the Federal Government announced a new tax regime for tobacco and other alcoholic beverages. Under the new rates for tobacco, each stick of cigarette will attract N1 specific rate per stick, that is N20 per pack of 20 sticks in 2018. While by next year, it will attract N2 tax per stick or N40 per pack of 20 sticks.
Opportunity
The main raw material, tobacco is widely grown in the country with manufacturers such as BATN actively involved in responsible tobacco leaf cultivation. According to the company, the volume of tobacco produced has increased from 2,088 tons in 2004 to over 2,500 tons in 2013, and about 10,000 people are currently directly involved in the tobacco growing operation.
Threats
The serious health implications attached to smoking of cigarettes, ban on single stick sales of cigarettes to the under aged, cultural and religious teachings against smoking, pose threats. Though so far, that has not really hampered the growth of cigarette sales in the country.
The emergence of substitutes in the market
The Nigerian market has also witnessed a growing market for e-cigarettes otherwise called vaping. Users see it as an alternative to smoking and it has been on the increase in the last five years. Many believe that it is less hurtful than smoking.
Also, it is not uncommon to see people smoking shisha at parties and night-clubs. Shisha smoking, also called narghile, water pipe, hookah or hubble-bubble smoking, has its origin from the Middle East and certain areas of Asia but has recently become more popular in the country, especially among young people. It involves smoking tobacco from a bowl through a hose or tube attached. The tube has a mouthpiece that the smoker uses to inhale the smoke.
Experts believe that shisha smokers are at risk of developing the same health problems as cigarette smokers, such as cancer and heart disease. A World Health Organisation study also suggested that a one-hour session of smoking shisha can be the same as smoking 100 or more cigarettes.
To further enhance its acceptability in the market, most shisha solutions come in various flavours such as peach, chocolate, mint, strawberry, and apple.
What consumers are saying
Nairametrics spoke with some consumers of cigarettes in Lagos. Most of them expressed divergent opinions on their choices of brands.
Muhammed Bashir, a trader, enjoys smoking and he doesn’t believe it is harmful to his health. “I love Benson.” he said with a smile.
Nairametrics also noticed that cigarette brands have very loyal consumers. According to Femi, a banker in one of the first-generation banks:
“I have been taking Benson all my life and I am addicted to the brand.”
Mallam Isa, a trader at the popular Ikeja market, revealed that the largest consumers of cigarette brands are mainly youths, although old men also buy from him.
“The market dey sell fast. All these young boys and even mature men buy their favorite brands.”
Tunde, another respondent, said that he loves the Rothmans brand and enjoys it anytime he smokes it.
According to him:
“When u smoke it, your lips will be sweet like forever…you will just keep rolling your tongue around your lips.”
The verdict
In a Twitter poll by Nairametrics, Benson & Hedges got 40%, Rothmans got 13%, while Marlboro got 10%.
https://twitter.com/Nairametrics/status/107249811334304153
The Nigerian market offers a lot of opportunities to manufacturers and growers of tobacco leaves in Nigeria.
The recent influx of flavoured cigarettes into the Nigerian market, which is mostly targeted at luring children, calls for concern. The regulators must double down to rid the market of illegal brands and also step up its enlightenment campaigns on the implications of smoking.
Also, manufacturers must ensure strict adherence to international standards and global best practice. The country should not be a dumping ground for illicit tobacco products.
Financial Services
Switch by Sterling: The remittance game changer
Subscribers to Switch will enjoy unlimited and seamless access to transfer money from abroad like regular wire transfers.
Although Nigerians in diaspora have always been able to access banking services in Nigeria through digital platforms, the recent introduction of the Switch banking app by Sterling Bank is bound to be a game-changer in the mobile banking space.
This is because Switch, a multi-service banking app, leverages technology to address some inadequacies of cross-border transactions and online money transfer such as Dollar to Naira or other convertible currencies on the front burner.
Regardless of exchange rate volatility, subscribers to Switch will enjoy unlimited and seamless access to transfer money from abroad like regular wire transfers.
Coming on board when the Central Bank of Nigeria (CBN) unveiled a new policy that ensures unhindered remittances for Nigerians in diaspora, Switch has berthed as a product of corporate foresight and a veritable source of foreign exchange earnings for Nigerians.
…Mobile Apps have Come to Stay
The advent of Switch into the mobile banking space in Nigeria has raised the bar of competition in a territory where MoneyGram, Western Union, PayPal, WorldRemit and RiaMoney have held sway over the years.
The app’s user-friendly features have endeared it to Nigerians in diaspora and relegated the competition in every aspect of money transfer from abroad. Essentially, the app is uniquely designed for diverse financial products such as insurance, treasury bills, fixed income securities, payment requests, investments and asset financing, among others.
The money transfer app, which has gained frontline status in its short period of existence, stands out from the competition and serves as a hub for sending money to Nigeria from the United States, United Kingdom and Canada. The easy to use app provides an opportunity for issue resolution using e-mail and social media accounts.
… Coming on Board of Switch
In order to register on Switch, a client is expected to provide aname and contact information while the registration ends with funding of the account. This enables the client to deploy the savings account to transfer money into other Switch users for free and transfers to non-Sterling bank account with fees of N25 or less.
The Switch app can be downloaded from either the Google Play Store or App Store. Subscribers can effortlessly register on the web by a click on the web too. Proving attractive to Nigerians of 18 years and above, its simplicity is fast boosting subscribers’ confidence. Clients will pay zero fee for transfers in the first six months.
…Switch Hedges Subscribers against Fraud
The world of mobile apps is like a game of whack-a-mole. As one fraud is being tackled, fraudsters rear their heads elsewhere with new tactics. Criminals have always exploited the mobile space with fake mobile apps.
However, the ongoing uptick in registration for Sterling Switch is not unconnected with the mobile app’s fraud-protection strategy that runs on advanced machines, specially designed to thwart fraud at both the install and in-app levels. This effectively hedges subscribers of Switch against cyber attacks.
…Switch by Sterling, a win-win
Switch is indeed a game-changer. The much sought-after solution provides better value to customers, builds a stronger brand, unlocks power of better connection for customers and makes account opening easy.
Prospective customers need not download many apps in order to invest in different asset classes. Switch provides opportunities for subscribers to build wealth through investment in various asset classes. It boosts profitability for the custodian.
Subscribers can transfer above N50,000 to other Nigerian banks. In order to enhance its services along the value chain, the solution operates on extended partnership network with PIP iT in the UK, i-invest and Doubble.Ng, among other institutions.
As a top brand, Switch by Sterling identifies its target demography, encourages user engagement, ensures compliance with platform design guidelines, uses frictionless navigating features and is highly responsive.
Switch stands out as the cheapest means for Nigerians in diaspora to transfer money online without risks associated with cross-border transactions. The financial mobile app is fast becoming the benchmark for other mobile apps in the Nigerian banking space.
Reviews
COVID -19 saving Nigerians millions in wedding and burial costs
As long as the pandemic persists, the ‘new normal’ is for ceremonies to remain subdued.
It was a sunny Saturday in May and like it had been for the better part of 8 weeks, the new normal was in force in Nosa’s household. The lockdown induced COVID-19 meant that all the hustle and bustle of giving attention to side hustles on weekends had all evaporated. Now he spent more time with his kids watching TV and playing video games. Whilst he has had to endure multiple weekends of lost revenue, staying indoors meant that his personal finance was still intact. But things would change dramatically this weekend.
Nosa got a call that he had just lost his aged mother to a brief illness. He had been battling with a terminal illness for years, but things seemed to be under control so her death came as a surprise. Even as he grappled with the thought of losing his mother, Nosa knew that he had to start making preparations for the expenses that are bound to come with burials in an African setting.
Thanks to the pandemic, and rules that came with it, Nosa ended up spending much less than he would have for his mother’s burial with most of the funds going towards mortuary expenses, transport and the direct cost of the actual burial itself.
READ ALSO: Post COVID-19: The Challenges Ahead
“This COVID-19 is bad but it has saved me millions of naira that I would have spent in this burial,” he remarked.
“I wanted to give my mom a befitting burial but these are hard times and I may have borrowed money just to fund this. But with COVID-19 and social distancing in place I did not have to do any of this,” Nosa informs our reporter.
Nosa’s gains translate to massive losses for a whole chain of service providers in the event management industry. Similar occurrences over the last few months have resulted in the loss of revenue for such businesses.
Events in Nigeria often cost anywhere between half a million naira to over N100 million depending on the financial muscle of those spending. Burials, weddings, naming ceremonies and birthday parties, make a burgeoning industry that spans several sectors of the economy.
From mortuaries to casket makers, event planners, event Halls rentals, professional mourners, caterers, confectionaries, party rentals, photographers, video editors, tailors, newspapers , etc, its an entire value chain of businesses that provide one service or the other for this industry.
Each of these events cost millions of naira to organize hosting as many people as the budget can support. According to a CNN article quoting a report from TNS Global, Nigerians spend as much as $9,460 for a wedding ceremony. The report also indicates the party industry could be worth as high as $17 million based on statistics in 2017.
The math can be easily deducted. Assuming 50,000 ceremonies every weekend at an average cost of N1 million that is a N50 billion per weekend or N2.7 trillion ($6.75 billion) per annum. GDP data from the National Bureau of Statistics indicates sectors that support the ceremonies market in Nigeria, telecoms, transportation, Arts and Entertainment is worth a combined N18.4 trillion.
Technology Ceremonies
Chuks, a Partner at a top consulting firm in Nigeria admits were it not for the pandemic his wedding could have cost him about N15 million personally and another N20 million spent by family, friends, colleagues and well-wishers. He is in his forties and his wedding had been much anticipated. He went ahead with his wedding last weekend with less than a dozen people in attendance and over 140 others logging on via Zoom. He claims while he ended up not spending millions on food, drinks, wedding halls and other logistic costs, he still achieved his goal of getting married.
Necessity they say is the mother of invention and has millions stay locked in their homes, they have resorted to apps such as Zoom, Instagram Live, Microsoft Teams to hold virtual events. These days Zoom themed parties now have their own rules and conventions. Friends from all parts of the world log in with each person taking turns to say nice things about the celebrants. Games are conducted to spice up the event and stories told by the celebrant. Music is also played by the Zoom host with participants dancing and having fun.
“It is like watching a live movie and also being part of it as the audience and participant” a wedding planner informed Nairametrics. Whilst one cannot underrate the connection physical socializing brings, virtual meetings are gradually becoming a lifestyle and the longer social distancing continues its cultural significance will only continue to increase.
Aderonke Adebamibola, CEO of Unik Ushering Agency, an Event management firm, confirmed to Nairametrics that business has really slowed down in the last few months. “Even though the NCDC has now given rules to guide weddings and other events, the budget now is way less than it used to be due to the cap on numbers of guests” she explained.
Now, most events are kept within the premises of family residences, depriving hall rentals, the money they could have made from leasing out their halls. Venue decorators also have much less on their hands to do, as they no longer have to decorate big halls.
According to Adebamibola, every single business in the chain has been affected, from caterers to ushers.
“Now, we even have to convince them to use one or two ushers for their events because they believe they don’t need ushers for 20 or 30 guests. Caterers cannot even cook a half bag of rice now because of the number of guests. This means that they are also paid less for their services, even if they expend the same energy and time” she said.
The new normal in this industry means that the things that used to be prioritized are no longer priorities. Hand sanitisers, face masks and hand washing equipment are now compulsories in events, while the hand-shaking, and hugs that would have characterized such weddings.
READ MORE: Governor David Umahi of Ebonyi tests positive for COVID-19
Due to the nature of the industry, a large percentage of the staff are kept on contract basis, so the reduction has not really translated into lay-offs. However, the industry revenue has been badly hit. A contract staff with NPU Events, who preferred anonymity, noted that in the last three months, she has only been called twice for events.
Since this forms a major part of her income, it has caused a major dip in her resources. COVID-19 has brought unwanted hardship to the Nigerian economy with small businesses and workers in the informal sector suffering the most.
A recent World Bank report indicates the Nigerian economy might contract by as much as 3% in GDP growth rate this year. This informed government’s latest decision to inject about N2.3 trillion into the economy to spur economic growth. The funds will be targeted at small businesses through non-collateralized low-interest loans. Whilst all these initiatives are geared towards stimulating the economy, the spending power of Nigerians will remain pivotal and as long as the pandemic persists, ceremonies will remain subdued.
Business Half Hour
BHH Podcast: What 2020 holds for SMEs (2) – Ugodre
Business Half Hour (BHH) is a weekly podcast targeted at Startups and Entrepreneurs, who are redefining the Nigerian business scene through innovation.
