United Capital on how COVID-19 has impacted Nigeria’s consumer goods sector

The COVID-19 lockdown and ban on interstate travel in Nigeria have taken a toll on the consumer goods sector, leading to a significant decline in revenue and profitability for many companies. Wale Olusi, the Head of Research at United Capital, discussed the impact of the pandemic on the sector in a recent interview with CNBC Africa. Olusi highlighted the challenges faced by consumer goods companies, including supply chain disruptions, reduced consumer spending, and the devaluation of the currency. Olusi pointed out that the combination of high unemployment rates, under-employment, and the overall strain on consumer spending has contributed to a sector-wide depression in revenue. The closure of businesses such as restaurants and pubs during the lockdown further added to the challenges faced by consumer goods companies, leading to a decline in both revenue and profit. Despite these challenges, Olusi remains cautiously optimistic about the second half of the year. He expects an improvement in performance as movement restrictions are gradually eased and businesses reopen. Olusi stated that companies with sizable import needs may benefit from the Central Bank's foreign currency loans, which could help alleviate some of the effects of the devaluation of the currency. Looking ahead, Olusi expressed confidence in the performance of companies in the food production sector, such as flour mills, sugar producers, and manufacturers of essential commodities. He emphasized that these companies are likely to fare better than those selling non-essential items due to the relatively stable demand for essential goods. When asked about specific companies that he is bullish on, Olusi mentioned flour mills and sugar producers as potential outperformers. He highlighted the resilience of these companies during the lockdown period and their ability to adjust prices to mitigate the impact of the pandemic. Olusi also pointed to personal goods companies like Unilever, PZ, and UAC as potential leaders in the sector, with a competitive advantage due to their wide distribution networks. In conclusion, while the consumer goods sector in Nigeria continues to face challenges due to the COVID-19 pandemic, there is hope for recovery in the second half of the year. Companies that focus on essential goods and adapt to the changing economic landscape are likely to emerge stronger as the country gradually reopens and economic activities resume.