Plot thickens for PZ Cussons share price as Nigerian naira (NGN) slips

February 13, 2024 11:04 PM AEDT | By Invezz

Plot thickens for PZ Cussons share price as Nigerian naira (NGN) slips — Image source: Invezz

Nigerian naira collapse continues

PZ Cussons stock price plummeted last week after the company published weak financial results in which it blamed the retreat of the Nigerian naira. This is a notable factor because the company makes a substantial amount of money in Nigeria and other African countries.

Unfortunately, the Nigerian naira’s performance has worsened since that report came out last week. Data shows that the currency has dropped to 1,500 against the US dollar. This is notable because it was trading about 900 two weeks ago. It was trading at less than 400 in the same period in 2023.

This is the official exchange rate, which is often better for companies like PZ Cussons. The black market rate has surged to 1,850, the highest level on record.

Therefore, there is a likelihood that PZ Cussons stock will continue falling as the naira exchange rate risks jump. For one, there is no viable option to solve the naira crisis since the country’s dollar liquidity has dropped to the lowest level since January.

Also, the actions of the Central Bank of Nigeria (CBN) might not be enough to solve the crisis. For one, the bank has not held any monetary policy meeting to address the issue. Its most recent meeting happened in July last year. Analysts expect it to deliver its biggest rate hike on record when it meets this month.

GBP/NGN vs USD/NGN

Impact on PZ Cussons

PZ Cussons and other companies operating in Nigeria are under increased pressure as the naira crisis escalates. There are a few reasons for this. First, the company is finding it difficult to repatriate its profits from Nigeria because of the liquidity shortage.

Second, a weaker currency means that inflation has risen, which is impacting the volume of sales in the country. The most recent data showed that Nigeria’s inflation has remained above 20% and the situation could get worse as the currency devaluation continues.

Finally, the plunging naira means that PZ Cusson’s sales are smaller in real terms since it reports in sterling. The Nigerian naira has also crashed to 1,900 against the British pound. It has fallen by over 300% from its highest point in 2022.

Therefore, the company is in a problem that it cannot fix on its own since it also sells its products in other African countries where the currency is depreciating. This means that the stock will likely continue falling in the near term.

The post Plot thickens for PZ Cussons share price as Nigerian naira (NGN) slips appeared first on Invezz

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