Consumer Goods Companies in Nigeria Will Record Lower Performance in 2016 – Exotix Partners

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Some consumer goods on display in a Nigerian store

Exotix Partners, an international Finance and investment firm has predicted that this year will be the most challenging for consumer goods companies in 15 years as economic depression, fiscal and monetary imbalance combined to constrain their operating environment in Nigeria.

In its latest review of Nigeria’s consumer goods sector, the firm said the macro-economic environment has deteriorated more than earlier anticipated and the downside risks have become even more pronounced.

The report noted that the weakness of the national currency, the naira, and the challenges of sourcing foreign exchange are major concerns, given the dependence of consumer companies on imported raw materials in the absence of a robust local supply chain.

According to the firm, besides its negative impact on earnings on account of an expected surge in input costs, associated foreign exchange (forex) losses will be significant, particularly in the year owing to a build-up in payable accounts, mainly by multi-nationals as they seek to avoid interrupting production in the light of challenges in sourcing for forex.

Exotix outlined other pressure points to include sustained weakness in consumer spending, underpinned by a surge in inflation, a decline in government spending and rising security concerns; and possible tax hikes.

“But it is not all gloom, as we expect large and dominant consumer companies to gain market share over the medium term–a reflection of their resilience and the weakness of smaller players in the current environment. This should allow for accelerated volume growth in the medium term; and headroom for price realisation. We observed a similar trend with Ghanaian consumer companies during Ghana’s recent economic crisis,” Exotix stated.

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