In the last ten months, several companies have scaled back their operations in Nigeria. Five multinationals have left the country. They all blamed harsh economic conditions for their exit. The Manufacturers Association of Nigeria reported that the value of unsold products held by Nigerian producers jumped 22% to 470 billion naira ($1 billion) by the end of 2022. This is the highest in the last five years, except for 2020. Problems like foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and poor infrastructure have affected the profitability and sustainability of these companies.
While the departure of these top brands raises concerns about the state of employment and investment in the country, it also creates a gap in the market, one that amplifies the way for the proliferation of counterfeits and locally made products of dubious quality. While these alternatives might be cheaper and more accessible, they pose threats to public health and safety, as well as the economy.
The counterfeit and substandard conundrum
The problem of counterfeit and substandard products is a serious and widespread issue that affects many sectors of the economy and society. These products are made or sold under another’s name or trademark without the owner’s authorization. They usually deceive or defraud consumers. Counterfeit and substandard products are often of inferior quality and pose health and safety risks to the users. Globally, this illicit industry is estimated at $450 billion.
Scarcity creates a gap between supply and demand, which counterfeiters can exploit to sell their products at higher prices or to customers who cannot access the original ones. It also reduces the availability of information and verification mechanisms for consumers. This can make it harder for them to distinguish between real and fake products. For instance, if the original products are out of stock or have long delivery times, consumers may resort to buying from unfamiliar or untrusted sources. These may include third-party sellers or online platforms, without checking the authenticity or quality of the products.
The scarcity of certain products also leaves room for alternatives, which may be cheaper and more accessible, but also of dubious quality and reliability. These alternatives may include locally-made products that do not meet the required standards or regulations. They may also use substandard or harmful ingredients. These alternatives may also compromise the performance, durability, and functionality of the products. They may not offer any warranty or after-sales service.
Currently, Nigeria is rife with counterfeit and substandard products, both local and imported. The country has one of the world’s largest counterfeit markets with 13% – 15% of drugs in the country being fake. In the past three years, the National Agency for Food Drugs Administration and Control (NAFDAC), the agency in charge of regulating the authenticity of food and drugs in Nigeria, has seized 2 trillion naira ($4.8 billion) worth of counterfeit drugs. Pharmaceuticals, fashion, cosmetics, books, and optical media are the most counterfeited products in Nigeria.
The economy vs counterfeits
Unfortunately, despite the looming problem, many people may opt for these products due to the economic downturn and Nigeria’s cost of living crisis. Nigeria’s middle class is shrinking. According to Numbeo, Nigeria has one of the lowest purchasing power, with its index standing at 8.41 in 2023. The increasing inflation is also eroding the purchasing power of Nigerians. As a result, more people will lean towards cheaper options. People are increasingly looking to save money or buy more items for the same price. Usually, counterfeits and subpar products are cheaper. Moreover, many people think that they are not harming anyone or breaking any laws by selling fake products.
Alarmingly, the counterfeit and substandard products crisis in Nigeria tends to worsen during the festive season. Last December, NAFDAC raided the popular Apongbon market in Lagos and seized fake drinks valued at N8 million. Recently, videos of factories producing fake wine duplicates in unsanitary conditions have circulated on the internet. It gets worse as counterfeiters have also improved their techniques and designs to make their products look and feel original. Food critic Opeyemi Famakin made an Instagram post about how he unknowingly drank a fake wine in a club that left him sick. Musician Buju also made a tweet, calling out club owners for selling fake drinks. “You are killing us,” a part of the tweet read.
In Nigeria, NAFDAC is the agency that regulates the quality and safety of products. It tests, inspects, investigates, and certifies regulated products and their production sites. It also enforces sanctions and penalties for non-compliance and violations of its regulations. However, regulation in Nigeria has faced many challenges and constraints in fulfilling its mandate. For example, despite introducing the Mobile Authentication Service (MAS) in 2010, which allows consumers to verify the authenticity of products by sending a code to a toll-free number, Nigeria is the world’s largest drug counterfeit market in 2023.
Last week Thursday, President Bola Tinubu urged multinationals operating in Nigeria that his administration was determined to remove all bottlenecks to the smooth running of their businesses. Regardless of how the exodus of multinationals is addressed, the dwindling purchasing power and rising poverty are enablers for the counterfeit crisis in Nigeria. Despite the huge risks that come with subpar and counterfeit products, the market may continue to thrive mainly because counterfeiting has become a matter of survival.