In 2018, a year after the country exited a recession and on the path of economic recovery, consumer goods giant Unilever Nigeria cashed in as it opened a $12 million Blue Band factory in Southwestern Ogun State.
The Anglo Dutch group had wagered that a hike in key products to fend off imported inflation, the introduction of a new foreign exchange regime by the central bank and improved consumer sentiments would magnify earnings.
However, the disruption in global supply chain, currency adjustment, and foreign exchange market illiquidity through the second quarter of 2020 has dealt a great blow to Unilever’s growth prospects.
For instance, for the first nine months through September 2020, the company’s revenue dipped by 15.64 percent to N44.73 billion from N51.62 billion. Revenue has been falling since 2018.
The company’s total production cost (cost of sales plus operating expenses) stood at N46.54 billion as at September 2020, which is 1.04 times revenue, and little wonder an operating loss of N2.85 billion was recorded.
As a result of spiraling production cost brought on currency devaluation and receding sales, Unilever recorded a loss of N2.06 billion, the first loss in a decade.
The outbreak of the COVI D-19 pandemic added a new layer of concern for most of the consumer goods players as lockdown in key revenue-generating and industrial states disrupted the demand and the supply side of the market.
Nigeria is likely to enter recession in the third quarter after its economy contracted 6.1 percent in the second quarter. The government expects the economy to shrink as much as 8.9 percent this year.
The International Monetary Fund has projected that Nigeria’s economy will contract by 4.3 per cent in 2020. Nigeria’s inflation rose to 13.71 per cent in September, hitting its highest level since its 13.34 per cent rate of March 2018.
Unilever felt the pang of the coronavirus pandemic as it scaled back on its expansion on the back of weak demand. The acquisition of property plant and equipment fell by 85.25 percent to N594.15 billion as at September 2020.
The consumer goods firm had a negative cash flow from operating activities of N1.53 billion in the period under review, which means it doesn’t have the financial strength to pay dividend, finance future expansion plans and settle debt.
The EndSAR protest that has resulted in the loss of lives and properties in Lagos State means Unilever is in a precarious situation because the consumer goods giant’s headquarter and main production plants are in Lagos.