Consumer confidence retreats in signal election uncertainty taking toll

Nigerian consumers are feeling less confident at present as the uncertainty from the upcoming general elections combine with the falling naira to feed angst. The NOIPolls Consumer Confidence Index released for the month of January 2015 showed a decline in CCI by 6 points to 61.4 points from 67.4 points in December 2014. “The Present Situation Index (PSI) experienced a large decline, while the Expectation Index (EI) experienced an increase,” NOI said in a report released yesterday. “The PSI declined by a substantial 22.2 points to stand at 37.6 – points, while the Expectation Index (EI) experienced a increase of 6.2 –points.” The NOIPolls Consumer Confidence Index (CCI) measures consumers’ perception of the economy and future expectations. The nation’s electoral commission postponed scheduled general elections by six weeks on Saturday due to the military’s need for more time to guarantee security for the vote. The sell – off in the nation’s stocks and bonds have accelerated this year and combined with the naira which touched record lows yesterday, it may crimp consumer spending. The selloff in oil prices is the major catalyst for the fall in the naira. Brent crude rose 2.3 per- cent to $55.95 per barrel as of 8:43 a.m. in London, down 53 percent from last year’s highs. “Our expectation of further naira depreciation over the coming year has a material impact on our input cost forecasts for the consumer companies under our coverage in FY15E,” said Robyn Collins, consumer goods and retail analyst at Renaissance Capital in a February 05 report. Collins says this is based on outlook for a continuing con- strained consumer environment with very little chance of government wage increases or employment growth. The currency of Africa’s biggest oil producer retreated 1 percent to 205.89 per dollar by 1:15 p.m. in Lagos. The Nigerian Stock Ex- change All Share Index (NSE – ASI) fell 1.5 percent to 28,277.70, the lowest since January 2013. Consumer goods firms operating in the country have felt the brunt of the sell-off. Nestle Nigeria is down 24 percent year to date, Cad- bury is down 2.3 percent while Unilever and GSK Nigeria are down 2.2 and 19.8 percent respectively in 2015. The NSE – ASI is down 17 percent in the same period by comparison. “We forecast Nestlé’s unit cost of production to increase by 10.1 percent in FY15E from 5.9 percent previously,” said Collins. “Our higher inflation and weaker naira forecasts are driving this increase. As a result, we have reduced our FY15E and FY16E HEPS forecasts by 12 percent and 14 percent, respectively.” With the exception of coffee and cocoa, most global food commodity prices have been declining since the end of 2012, although the de- clines are offset somewhat by the naira depreciation. The companies that produce more of their products in Nigeria are less exposed to naira depreciation than those who import finished goods.