Firms marketing budget may shrink further in 2015

Government plans to cut spending in 2015, as a result of slide in international oil prices is likely to hit companies’ marketing budget, BusinessDay investigations show.

This is worrisome, especially as companies prepare marketing plans for 2015, with intention to drive consumption in the New Year.

As the situation is unsettling government officials, it is also rattling marketers who are already watching the development as they have started readjusting their budgets in expectation of expenditure cuts, which will affect their plans.

If companies readjust their activities in 2015, and reduce their promotion budget, that means advertising spend will be cut and this will also affect the media.

Last year, spend on above the-line was put at N103.8 billion.

The president of National Institute of Marketing (NIMN), Ganiyu Koledoye, who recalled that Nigeria also experienced this belt tightening exactly 20 years ago, said “what transpired in that year is now being replicated.

Internationally, there are crises because of sliding oil prices and uncertainty all over the world, but our own challenge is our own making.”
Brent, which peaked around $115 a barrel on June 19, had plunged 32 percent by November to a four year low.

Nigeria’s finance minister in November proposed lowering the assumed benchmark oil price for the country’s 2015 budget to $73 per barrel, effectively cutting the budget by 6 percent.

Final total government spending, when measuring GDP by expenditure, was N6.5 trillion or 8.07 percent of GDP in 2013, according to data from the National Bureau of Statistics (NBS).

Crude oil sales made up 80 percent of the governments revenue in 2013.

About 20 years ago, Koledoye said Nigerians discussed about not relying solely on crude oil as the country’s mainstay but its leaders had refused to adopt this which would have freed it from experiencing this difficulty.

Assessing the effect of the austerity on marketing, Koledoye said from marketing point of view, it would necessitate cut in marketing budgets, projecting that the situation may not improve immediately because there were other local issues, like political transition.

“We have also monitored that the broad economy used to suffer but the local economy where the elections are taking place use to boom. It is up to marketers to identify where the opportunities are, because a lot of funds are still being expended in the society.

Marketers should tighten up their belts, reduce cost but continue to satisfy customers’ needs and look for areas where expenditures are continuing,” he advised.

A market analyst, who prefers anonymity, said “whenever the economy faces this situation of dwindling revenue, it sends marketers back to the drawing board. It is expected that the marketing budgets suffer whenever there is external shock. We will face the same situation this
time.”

In his assessment, the president of Public Relations Consultants Association of Nigeria (PRCAN), John Ehiguese, believes that government planned expending cut measure would likely affect consumer power and this will likely impact on companies revenue, saying in such situation, cutting marketing budgets would depend on individuals companies as some companies may decide to use the time to raise their marketing activities.