High inflation and volatile naira among headwinds for consumer goods group
Coast to coast coup d’etats in Africa raise concerns about the spread of instability. In Nigeria, the continent’s largest democracy, economic worries trump political ones. President Bola Tinubu’s government has implemented a series of liberal reforms in the hopes of reviving local finances. Recovery will be hard won. Consumer goods group PZ Cussons wants to reorganise its operations in the country. It is unlikely to be the only company to do so.
There are a number of reasons why Cussons plans to buy out shareholders and delist its local subsidiary from the Nigerian stock exchange. Inflation reached an 18 year high in July. Nigeria’s currency, the naira, is volatile. A failed roll out of new banknotes earlier this year hit basic transactions. The central bank floated the currency in June in a bid to improve liquidity and dollar access. Since then, the naira has fallen sharply in value.
Shares in PZ Cussons’ main London listed business have dropped along with the Nigerian currency. Cussons was formed in Sierra Leone in the 19th century. Nigeria is its fourth most important market and the biggest in Africa.
Cussons will pay £23mn to buy back a 27 per cent stake in PZ Cusson Nigeria. Doing so should simplify the company’s governance structure.
Other companies may be tempted to follow the same route. Unilever, Nestlé, Guinness (owned by Diageo) Cadbury (owned by Mondelez) and GSK are among the western companies that maintain stock market listings in the country. These were once viewed as a way to attract local talent and improve local sales.
Not every company with a local listing will have the same option, however, particularly the ones that listed at the behest of regulators. Airtel Africa’s shares have been dual-listed in London and Nigeria since the company joined markets in 2019. South African peer MTN also maintains a Nigerian listing. Telecoms and infrastructure providers will find it harder to leave Nigeria’s stock market than suppliers of soap and toothpaste.
