The recent increase in the prices of bottled water and sachet (pure) water is attributable to the increase in the cost of production and of material.
This was disclosed by Favour Ogunniranye, Senior Analyst, Financial Derivatives Company, while on Channels TV’s Business Incorporated show on Thursday afternoon.
She stated that manufacturers, in a bid to maximize profit as raw material input rises, are faced with the option of either increasing production volume or prices.
What Ogunniranye is saying
She said that the price increase is cost-driven. She said costs of production for bottled water and pure water companies are higher because the manufacturers have had to purchase raw materials for the packaging of the products, given the increase in the price of plastics, diesel and other materials needed.
“In 2022, we have seen that manufacturers are facing further cost pressures, considering that diesel prices aren’t what they used to be, so we can even expect a further hike in prices.
“Because at the end of the day, the goal for a lot of businesses is profit maximisation, and that can only be achieved through either costs management or an increase in volume sold or the selling price of the product. So, the major factor is actually the cost,” Ogunniranye says.
What you should know
- Nairametrics Research reported in March that the price of sachet water, commonly known as ‘pure water’ had doubled across most states in the country, selling at a minimum of N20 per sachet from N10 recorded earlier in the year.
- The recent increase in the price of sachet water indicates a 300% compared to N5 recorded before the covid-19 lockdown in 2020. The price increase has now spread across major states in Nigeria, with Abuja, Lagos, Ogun, Oyo, Kwara, Imo States amongst others already selling a sachet of pure water for N20.
- In November 2021, Water Producers Association of Nigeria (WAPAN) warned that the price of ‘pure water’ could rise from N20 to about N50 per sachet if the federal government implements the proposed Excise Duty on carbonated beverages.
- On diesel prices, Ayobami Omole, an Equity and Thematic Research Analyst at Tellimer Research told Nairametrics last month that the high cost of diesel, partly caused by the Russian invasion of Ukraine, is impacting negatively on the manufacturing sector in Nigeria is set to push Nigeria’s inflation for Q2 around the 16% rate.