In 2015, when Muhammadu Buhari was elected president of Nigeria, one United States dollar (USD) was approximately 183 naira (NGN). In 2019, four years later, naira was devalued to approximately NGN 365 per dollar. Now in 2023, another four years later, it has further devalued to approximately NGN 815 per dollar, according to Oanda. Right now in the black market, the USD rate has significantly plummeted to NGN 1,150, according to Naira Today. Several reasons caused this to happen, but a lot was due to the newest policies made by Nigeria’s newest president, Bola Ahmed Tinubu, popularly called BAT.

A few days after BAT was sworn-in as Nigeria’s newest president, he made certain significant changes. He removed Nigeria’s fuel subsidy, and unified the naira-to-dollar exchange rate. This means that Nigerians would no longer conduct foreign exchange business at the rates initiated by the Central Bank of Nigeria (CBN) but mainly by the black markets. These policies have spiked the cost of living crisis currently experienced in the country, and posed an insurmountable threat to business owners. Among those affected are small and medium-sized enterprises (SMEs), and the beauty industry is no exception.

Abuja-based beauty retailer, Cho&Zen Beauty, which launched in 2018, imports legacy skincare brands from countries like the US, Japan, and Korea, including COSRX, CeraVe, and Good Molecules. “Importation was tough when we started, and it’s gotten tougher,” Sakana Philip, founder of Cho&Zen Beauty, says to BeautyMatter. “[For one], when we pay these brands, we do not pay in naira. We have to make the high conversion rates to dollars to be able to pay them,” Philip continues. At the time of initial launch, she identified how difficult it was for Nigerians to get these products and therefore invested heavily in being a retailer.

While Nigeria’s tariffs plans for power supply continue to skyrocket, its provision doesn’t match the demand. This has made a lot of SMEs—especially those who run brick-and-mortar stores with a dedicated physical customer base—run on alternatives like generators. However, the removal of the fuel subsidy by the government has presented a multifaceted challenge, specifically an increase in fuel price. This decision, seemingly aimed at economic restructuring, has inadvertently led to a substantial surge in costs, significantly affecting every facet of the supply chain for these small-scale entrepreneurs.

“The revenue is growing, but the profit is shrinking. That’s the current reality,” Adeola Adeboye, founder and Creative Director of beauty brand, MS Metics, tells BeautyMatter, “and I still maintain that the Nigerian beauty market is not in tune with the current economic reality of the country,” she continues. MS Metics is an independent beauty brand launched in 2018. It focuses on the production of a wide variety of beauty products including eyelash extensions, makeup powder, lip glosses, etc. Faced with the current economic crisis and the dilemma of not compromising on quality, it's now creating products in smaller batches, with a focus on best sellers. “We have had to adjust accordingly,” Adeboye says.

In parallel with the fuel subsidy removal, the unification of the dollar has reshaped the dynamics of imports for beauty SMEs. The naira’s adjustment to a new exchange rate introduces complexities for businesses reliant on imported products. The fluctuating exchange rates have led to a surge in the costs, directly impacting expenses like logistics. This economic strain has posed a significant threat to the competitive pricing and market positioning of these beauty enterprises. They become faced with the dilemma of either absorbing these heightened costs, or passing them on to consumers.

To provide a tangible context to the impact, The Mastercard SME Confidence Index has reported that 55% of Nigerian SMEs are concerned about the rising cost of doing business. Philip remembers that when Cho&Zen Beauty was launched in 2018, she invested about 4 million naira as starting capital. Going by the rate of NGN 365 per dollar, NGN 4 million was approximately USD 10,000. However, with the current economic climate, and going by the rate of NGN 1,150 (as of today) per dollar, NGN 4 million amounts to a meager approximation of USD 3,400—a very significant devaluation in the past five years.

In response to these challenges, beauty SMEs are adopting strategic measures to mitigate the impact of these government policies. Beauty business consultant and branding expert, Yemi Ajibade, believes that one of the surest ways to navigate these challenges, grab the attention of the customers, and make sales is the making of newer versions of existing products. For example, a new colorway of an already existing eyeshadow palette, or a new fragrance option to an already existing beauty product. “Sometimes, consumers just want new products, and see something exciting to jump on,” he says to BeautyMatter. This diversification not only allows for creativity in product offerings but also serves as a buffer against economic uncertainties, ensuring that businesses remain adaptable in the face of unforeseen challenges.

Ajibade also suggests that in line with certain mainstream beauty brands, what SME beauty brands in Nigeria could do is something called the “miniaturization of products.” This essentially means that already existing beauty products from these brands could be made available in smaller sizes and slightly adjusted price points. “This gives room for the introduction of newer customers, in addition to the already existing ones,” Ajibade continues. Brands like MS Metics, for example, have the bulk of their customers in Nigeria. However, they’re looking to expand into other countries like the US and those in Asia. This is because a great way to navigate the economic crisis is adjusting price points, especially currencies.

As Nigeria’s beauty SMEs navigate these changes brought about by recent government policies, adaptability becomes the cornerstone for survival. By employing certain measures such as strategic sourcing, branding, localization, and diversification of revenue streams, these enterprises can weather the storm, ensuring the continuity of a vibrant and thriving beauty industry that caters to both entrepreneurs and consumers alike. Adaptive resilience, rooted in strategic foresight, is essential for the sustained growth and prosperity of SMEs in the evolving Nigerian economic landscape.