New Telegraph

H1: Consumer goods’ stocks lose N437bn


Nigeria’s economic landscape has been challenging for the manufacturing sector and, particularly, the consumer good industry


Investors in consumer goods’ sector quoted on the main board of the nation’s stock market lost about N437 billion during the half year of 2020 following negative market sentiments as COVID-19 ravages the country.


The market sentiments of the sector, which comprises segments such as automobiles/auto parts, beverages, food products, household durables and personal/ household products among others, remained on the decline following the ravaging scourge.


Checks by our correspondent revealed that the sub-sector recorded a loss of N437 billion or 19.34 per cent to close at N1.823 trillion in market capitalisation on June 30, 2020 as against the opening figure of N2.260 trillion at the beginning of trading on January 2. Speaking recently at an interactive session for the consumer sector, the Chief Executive Officer of the Nigerian Stock Exchange, Mr. Oscar Onyema, said: “Over the last few years, Nigeria’s economic landscape has been particularly challenging for the manufacturing sector and particularly the consumer goods industry.


“Despite the implementation of different industrial policies and industrialization strategies like the import substitution policy, export promotion strategy and foreign private investment led industrialization, the sector has  experienced policy reforms and directives that have negatively impacted on the performance of the sector’s value chain.”


A recent survey conducted by REACH Technologies, a Nigeriabased fintech, on behalf of FBNQuest, corroborates findings from the NBS COVID impact survey that consumers have fallen on harder times. “We infer from the survey that Income levels are down by an average of 30 per cent since March, while job opportunities are fast disappearing. Another sticking point is that consumption of non-essentials has been cut drastically,” Onyema said.


Respondents stated that they had reduced spending on higher value category items by 22 per cent since March. Although overall consumption has reduced since the pandemic started, the least spending cuts were made on food and health, which respondents viewed as most essential. According to the respondents, “it is now becoming clear that the consumer goods sector is among the hardest hit by the economic crisis brought about by the COVID-19.


“The fragility of household wallets has been laid bare, with statistics now pointing to even weaker consumer sentiments. The knock-on effect of fading demand and weaker oil prices are also stifling earnings of consumer goods companies. “The market has responded sharply to these challenges by marking these companies down. Year-to-date, the consumer goods index is down -28 per cent – the worst performing index, behind the broad market index’s -7 per cent.


“The consumer companies have also entered an exceptionally tough phase. Following the crude price collapse in March, accessing foreign exchange at higher interbank rates made obtaining raw materials more challenging.


“The companies are only able to obtain dollars at rates of around N360-390/US$ relative to N330-360/ US$ pre-oil collapse. That aside, given that consumer wallets are under pressure, passing on price increases to combat heightened competition comes at a great cost.


“Among the publicly-listed companies, Q2 results – most of which will have been published by late July) – will reflect more of the COVID-related challenges, given that the lockdown took effect in late March. The other pressure point expected to be seen comes from FX losses booked by the listed companies in their financial statements as a result of the currency depreciation.


“Essentially, information provided by REACH confirms that consumer sentiments have turned sourer, with only 3 per cent of respondents claiming that they are benefiting from the pandemic. More recently, the VAT increase in February and an impending hike in electricity tariffs potentially tightens the squeeze on disposable incomes further.


“An acute downturn in spending is therefore increasingly likely this year.


The IMF projects a GDP contraction 3.4 per cent in 2020, while the labour ministry expects unemployment to rise to levels above 33.5 per cent from 23 per cent in Q3 2018 (last publication). Indeed, recent media reports are already pointing to job losses in key sectors.”

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