Nigerian consumer sector to face renewed pressures in 2021

0
Opportunityâs agricultural finance initiative will help ensure that client Ruth Nassimbwa has a steady supply of fruits and vegetables for her market stall in Kampala. Ruth was in business for years, but until she received an Opportunity loan in 2006, she had difficulty purchasing inventory. A true entrepreneur, Ruth expanded from selling groceries to operating her own restaurant. Now repaying her tenth loan of $779, her business is stable and her loan is insured. Ruthâs income has more than doubled enabling her to send her four children to school, and to hire four neighbors to help in her businesses.

The outbreak of the coronavirus pandemic in Nigeria impacted several businesses, leading to widespread layoffs and wage cuts, as businesses struggled to stay afloat. Inflicting further pressure, increase in petrol prices and electricity tariffs weighed on consumer pockets later in the year.

Nevertheless, the Food, Beverage and Tobacco industry real GDP outperformed the broader economy, growing by a marginal 1.3% y/y in 9M 2020 compared to the 2.5% y/y decline in aggregate GDP within the same period.

We believe the outperformance reflected the positive impact of the border closure on some specific businesses within the sector, particularly food processors who had a bigger supply-demand gap to fill due to absence of smuggled alternatives, netting out the impact of Covid-19 on the sector.

In 2021, there appears to be no respite for consumers just yet as initial indications point to the possibility of a 50.0% rise in electricity tariffs. Furthermore, petrol prices are expected to continue an upward surge in the face of rising crude prices.

As a result, we think consumers will continue to tighten spending patterns and focus consumption on necessities.

For the Food, Beverage & Tobacco industry, we think the sector may remain under pressure particularly when we factor that the positive impact of the border closure would taper upon resumption of activities at the border.

Weaker consumer spending and reentrance of smuggled products could weigh on the performance of the sector and consequently depress performance of players within the segment.

This site uses Akismet to reduce spam. Learn how your comment data is processed.