Several retail outlets in the country are worried about a decline in profitability the one not seen in years as they continue to grapple with several challenges undermining sales across the markets
The slump in the purchase by consumers has escalated rapidly over the past year as the 13 largest listed consumer firms saw inventory turnover ratio fall to 2.27 times or 161 days on average in Q3 2018, from 4.50 times or 81.11 days in the corresponding period of 2017.
The figure stood at 3.09 times or 118.11 days in 2016 when a precipitous drop in crude oil price stocked dollar scarcity that paralysed business and tipped the country into its first recession since 1999.
Consumer goods firms are struggling to grow sales and bolster margins as Nigeria, with a population of 180 million people, has 87 million people nearly half its population in extreme poverty as high inflation environment continues to erode discretionary income.
Nigeria’s economy remains fragile as GDP grew by 1.80 percent in the third quarter of 2018, a downturn from 2.10 percent in the fourth quarter of 2017.
Inflation for the month of December stood at 11.44 percent, which is higher than the 11.28 percent figure for November 2017.
Recently, Shoprite, one of Africa’s biggest retail outlets, in a trading statement said it expects headline earnings per share (HEPS) including an adjustment for hyperinflation to fall by as much as 26 percent to 388.6-441.1 cents for the 26 weeks which ended on Dec. 30.
According to the statement, the outlet has seen a 17.24% fall in non-South Africa revenue for the quarter end-December and described it as a setback for the group, which has long seen its expansion into the rest of Africa as a major driver for its growth.
Consumer Goods giant, Unilever revealed that it reported a-lower-than-expected fourth-quarter sales as a result of flat volume growth in developed markets. While looking ahead 2019, Unilever said it expects the 2019 market condition to remain challenging.
The dwindling purchasing power of Nigerian consumers means many manufacturers cannot spread the growing cost of production to consumers.
According to Emmanuel Asika, an equity research analyst said most Nigerians suffered significant erosion from naira devaluation and an increase in the price of fuel while wages are yet to be at par with inflationary consequences of those events.
“After the recession, a lot of middle-income class left the country in search of greener pastures, thus dampening sales volumes as patronage reduced,” he said.
OLUFIKAYO OWOEYE
