• Tuesday, May 28, 2024
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Consumer goods firms to be hit by #EndSARS protest

Consumer goods

The closure of outlets by the largest food retailers whose goods were looted by hoodlums that hijacked a peaceful protest by youths against police brutality and extrajudicial killings could result in loss of significant revenue for consumer goods firms.

This is because these food retailers are valued customers of companies who are reeling from weak consumer purchasing power, currency devaluation, decrepit infrastructure, foreign exchange scarcity, and Covid-19 induced headwinds.

The destruction of properties is a wrong signal for investment. Wholesalers whose shops have been burgled will be unable to restock, and their ability to demand for goods from manufacturers has been hampered, according to Gbolahan Ologunro, equity research analyst with CLS Stockbrokers Limited.

“Damage has been done to investor confidence and this will further hinder foreign direct investment as well as capital investment,” said Ologunro.

Grocery outlets owned by Spar International and South Africa’s Shoprite Holdings were among those targeted by hoodlums, along with electronic smart phone stores across Lagos State.

No fewer than 56 people have been killed in the protest related violence after the military opened fire at protesters, according to rights group Amnesty International.

The Lagos Chamber of Commerce and Industry estimates that the unrest has cost about N700 billion ($1.8bn) in lost output, although the oil industry – Africa’s biggest and the mainstay of the economy – has not been affected so far.

Abiola Gbemisola, analysts at Chapel Hill Denham, said companies would be forced to sell on credit because retails that had been looted.

Entities such as Cadbury Nigeria plc, PZ Cussons, and Unilever Nigeria with headquarters and factories in Lagos will feel the pang of the crisis more than those located outside Lagos, he said.

The third quarter earnings season that began last week showed a lot of consumer goods firms fell off the cliff, as they capitulated to a difficult business environment and the coronavirus pandemic that disrupted the supply and the demand side of the market.

For instance, Unilever Nigeria, International Breweries, and PZ Cussons recorded collective losses of N13.42 billion as at September 2020, while the entire listed firm saw revenue slump.

Nigeria is likely to enter recession in the third quarter after its economy contracted 6.1 percent in the second quarter. The government expects the economy to shrink as much as 8.9 percent this year.

Wale Okunrinboye, equity research analysts at Sigma Pensions, said the closure of retail outlets means the unemployment rate will continue to go up and the economy could be in a recession for a long time.

The recent Purchasing Managers’ Index (PMI) released by the Central Bank of Nigeria (CBN) showed employment had contracted across focal areas of manufacturing and non-manufacturing sectors in October.

“The looting will affect demand. The products being looted were not meant for all Nigerians. They were only meant for the vulnerable. The products are being abused and sold in the open market. Looted palliatives meant for one state are being sold in other states,” said Ambrose Oruche, acting director-general of Manufacturers Association of Nigeria (MAN).

“The tension in the environment is affecting people and deterring them from spending. People are saving for eventualities. Spending has slowed down as the funds are not in right now,” Oruche said.