Strong consumer spending seen amid Nigeria’s uncertainty

Unilever Nigeria Plc, which manufactures, detergents and toothpaste said consumer spending will continue to hold firm in Africa’s largest economy, despite uncertainty from an Islamic insurgency in the north and elections due by February.

 

“We will see some growth in consumer spending this year, in spite of the turbulence in the market and a certain degree of sales depression in some regions,” managing director Yaw Nsarkoh, said in an interview yesterday at an investment conference in Lagos. 

“While the country faces some short term issues, we have a long term commitment to Nigeria.”

Unilever which has an ambitious growth plan to more than double the size of its African business by 2020, has spent $200 million (N32.6 billion) of cap-ex in Nigeria, to expand its factories in the past two years, said Nsarkoh.

The company which manufactures 80 percent of its brands sold in Nigeria, will partner suppliers of raw materials to meet its growth projections as it seeks to tap into the country’s 170 million plus strong consumer market.

“Partnership is integral to growing our presence in the country. As demand for our products increase we will make efforts to do backward integration by working closely with farmers,” said Nsarkoh.

Nigeria’s relatively young population with growing disposable income, increasing urbanisation and robust economic expansion is causing an explosion in demand for consumer goods,  giving investors such as Unilever a reason to be bullish about the business opportunity.

The International Monetary Fund (IMF) is forecasting economic growth of 7.3 percent for Nigeria in 2014, up from 6.4 percent last year.

Recent developments, such as the rebasing of gross domestic product (GDP) calculations which catapulted the nation to the top position, as Africa’s largest economy are bringing increased visibility and more favourable global perceptions of the economic stature of the country.

The country’s GDP Per Capita almost doubled to $2,700 post rebasing, giving a more accurate picture of the purchasing power of the population.

Lagos, Nigeria’s economic capital with a population of over 20 million, will have more than $25 billion a year in consumer spending by 2020, equivalent to New Delhi, according to a 2010 McKinsey & Co. report.

Unilever which is the nation’s second – largest consumer company reported a 2.8 percent decline in year on year revenue to N13.83 billion in the first quarter (Q1) of 2014, compared with N14.23 billion in Q1 2013.

Net income declined by 40.6 percent to N751 million in the period as operating expenses rose 32.5 percent.

Unilever Nigeria’s stock has advanced 2.23 percent this year to N55 per share on July 3 compared with a 3.28 percent gain for the Nigerian Stock Exchange All-Share Index.

The company which employs 1,300 people directly in Nigeria said it signed 8 Memoranda of Understanding (MOU) with different supply partners that have made a decision to commit and invest in Nigeria.

The investment conference in Lagos which had over 60 global raw material suppliers in attendance was informed of investment opportunities in Nigeria by the state governors of Lagos, Ogun and Kogi, as well as the Minister of Industry, trade and Investment.

PATRICK ATUANYA