The currency restrictions imposed by the Central Bank is becoming unbearable for PZ Cussons Plc as the maker of imperial leather soap shriek as it pays 70 percent more than the official rate for dollars.
PZ Cussons woes accentuate the plight or pains of consumer goods firms in Africa’s largest economy as unavailability of dollars has made it practically difficult for them to pay suppliers of raw material.
These monetary policies have forced many companies to close shops and some have resulted to cutting staff strength to stay afloat.
The apex pegged the naira at N197-N199, an unrealistic rate given the sale of the currency sell at N320 at the parallel market. The apex bank said such measures are necessary to stabilize the economy and curb inflation.
Ironically, economic growth has slowed to 2.8 percent, the lowest in a decade while inflation rose to 12.80 percent in March from 11.40 percent in February on the back of hike transportation costs and rising food price, according to data from the NBS.
UAC of Nigeria Plc, conglomerate giant said the weak economy has impacted negatively on its operations and some of its subsidiaries.The company has suspended its right issues due to weak equity market.
Nestle SA said its local unit has had to widen the number of banks it uses so that it can access enough foreign exchange. Last year, it was waiting as long as six weeks to be allocated dollars, according to Renaissance Capital Ltd. analysts.
“Our outlook in PZ Full year earnings still remains bearish as the current macroeconomic challenges are expected to further dampen earnings,” said Robert Omotunde, equity research analyst with Afrivest limited, in an emailed note to Nairametric
“The stock is currently trading at N23.50 (06/04/2016) against our target price of N17.32 and has a trailing P/E of 27.2x and P/BV of 2.2x against peer averages of 17.5x and 3.7x respectively, implying the stock is currently overvalued,” said Omotunde