Nestle Nigeria Slows Capex as Consumers Feel Devaluation Pinch

Given the unprecedented outcome of the presidential election, Nigeria will for the first time in its history experience a peaceful transition from an incumbent president to a newly-elected candidate under civilian rule after only a single term in power. It remains to be seen whether this political context will have a positive effect on the investment climate in Nigeria.

Weak oil prices and escalating tension over the postponement of the presidential election in Nigeria from February to March resulted in the devaluation of the Naira to 200 to the US Dollar. The dampening of consumer expenditure over the devaluation has had companies like Nestle readjusting their expenditure projections for the current year.

Dharnesh Gordon, Nestle Nigeria’s Chief Executive, has noted the challenges of managing company costs without passing on the costs to the consumer. Nestle has invested $400 million over the past six years into its food and cereal business and looks to spend $200 million over the next 18 months to maintain growth in the region.

While citing the effects of security challenges on the Naira, Gordon expects a weaker Naira, ranging between 220 to 250 to the US Dollar this year. Nestle is also targeting the Nigerian Diaspora with their Maggi seasoning exports to the UK and exploring venturing into the US market.

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