EFFECT OF RECESSION ON THE PRICE OF CONSUMABLE GOODS IN NIGERIA

CHAPTER ONE

INTRODUCTION

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;

i)             To ascertain the effect of recession on the price of consumable goods

ii)           To examine the impact of recession on the price of consumable goods

iii)          To ascertain if recession plays any significant role on the increase or decrease in price of goods

iv)         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;

(a)Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.      

(b)Time: 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. 

(c)Finance: 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:  Oil glut simply refers to a situation where there is excessive supply of oil by the various oil producing in a countries.

Economic recession: economic recession is a period of well lightening a period that is characterized by drastic cut down on aggregate demand for goods and services.

Infrastructural facilities: 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.

Raw materials: 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