Analysts have labelled the consumer goods sector as undervalued in the Nigerian stock market, highlighting that macroeconomic conditions and consumer engagement are crucial for its growth.
This topic was explored on the podcast “Drinks and Mics,” co-hosted by Ugo Obi-Chukwu, CEO of Nairametrics; Akinbamidele Akintola, CCO of Alerzo; and Arnold Dublin Green of Cordos Capital.
When asked which sector presents undervalued growth opportunities, the CCO of Alerzo remarked, “Undervalued right now, I think the consumer goods sector.”
Further elaboration revealed that the existing macroeconomic conditions and consumer engagement in the sector are not strong enough to attract investors seeking undervalued opportunities.
Despite revenue growth for most consumer goods stocks, favourable macroeconomic conditions and supportive factors are still necessary to fully transition the sector to a bullish phase.
“It is not volume; volume is growing, but the price of consumer goods is moving faster than volume,” Akinbamidele noted.
The analysts cautioned that price shocks resulting from increases could deter consumers in the short term, potentially leading to bearish price movements in company stocks.
Spike in finance costs
Finance costs for major FMCG companies in Nigeria surged by 133.3% year-on-year, reaching N1.074 trillion in the first nine months of 2024, compared to N460.22 billion in 2023.
- Companies such as Champion Breweries, International Breweries, Nigerian Breweries, BUA Foods, Dangote Sugar, NASCON, Unilever, Cadbury, and Nestlé are facing mounting pressure from increased foreign exchange losses, challenging debt profiles, and rising interest rates.
- This significant increase underscores the broader economic challenges impacting these companies. Nigeria’s economy has been grappling with rising interest rates, driven by the central bank’s efforts to combat inflation, which has made borrowing more expensive and increased the cost of servicing debt.
- Additionally, the devaluation of the naira has resulted in substantial foreign exchange losses for companies with dollar-denominated liabilities.
For FMCG companies, these issues are further compounded by declining consumer purchasing power, which limits their ability to pass on rising costs to consumers.
Market trend in 2025
The Consumer Goods Index is experiencing a strong upswing in 2025, following a year-to-date performance of 54.44% in 2024. This bullish momentum is marked by significant price increases driven by strong rallies in key individual stocks.
- The year 2025 began with the index at 1,743.4, quickly surpassing the 1,800 mark to reach 1,809.1 by the fifth week.
- However, a slight pullback in early February brought the index down to 1,733, reflecting a decline of over 3.60% from its previous high of 1,809.1.
Despite this setback, the index experienced a rebound, aided by a rise in heavyweight stocks during the week ending February 21, 2024.
For February 2024, the index achieved a 1.70% month-to-date performance, finally ending the month at 1,839 with a market volume of 14 million shares.
