COVID-19: Nigeria economic impact & implications for CPG · 2020-03-29 · economic growth Economic...

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COVID-19: Nigeria economic impact & implications for CPG

DOCUMENT INTENDED TO PROVIDE INSIGHT AND BEST

PRACTICES RATHER THAN SPECIFIC RECOMMENDATIONS

Lagos | March 30, 2020

McKinsey & Company 2

COVID-19 is, first and foremost, a global humanitarian challenge.Thousands of health professionals are heroically battling the virus, putting

their own lives at risk. Governments and industry are working together to

understand and address the challenge, support victims and their families

and communities, and search for treatments and a vaccine.

Governments, businesses and development institutions around the world need to act promptly.This document is meant to help senior leaders understand the COVID-19

situation and how it may unfold, and take steps to protect their employees,

customers, supply chains, and financial results.

Current as of March 29, 2020

Read more on McKinsey.com


https://www.mckinsey.com/featured-insights/Coronavirus-Confronting-the-crisis

https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business

https://www.mckinsey.com/


McKinsey colleagues facilitating our discussion today

Amandla Ooko-OmbakaEngagement Manager, Nairobi

Yaw Agyenim-Boateng

Partner, Lagos

Acha Leke

Senior Partner, Johannesburg

Peter Gauis-ObasekiPartner, Lagos


Discussion topics

COVID-19’s economic impact

01Oil price shocks and economic

02Perspectives for Consumer Goods companies

03


COVID-19 situation in Africa: ~4000 confirmed Africa cases…


46 African countries with confirmed COVID-19

cases as of March 29, ~130 deaths Isolated cases

Small clusters

Community

transmission

Sources: WHO situation reports, JHU global dashboard, press search; https://www.who.int/emergencies/diseases/novel-coronavirus-

2019/situation-reports

402

1187

974

576

454

38

130 207

92

36

278

65

141

16

4

5

8

60

5

6

613

3

13

3

63

7

7 62

5

3

17

5

3

14

23


0

0.5

3.0

1.5

1.0

2.5

2.0

0 5 10

15

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

40

Day

…and the epidemic is progressing at a similar rate to Europe

COVID-10: first 40 days for Africa and Europe1

Comparison of the total number of COVID-19 cases

reported over the first 40 days since first case reported in

each region

To

tal

CO

VID

-19 c

ases (

000s)

1. All Africa data were provided from African Union Member States. Europe’s data were taken from the latest WHO sitrep for the

Euro region:

Sources: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports

Africa Europe


https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports

https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports


In 2020, we define four scenarios for Africa, consideringboth the health and economic situations


Sources: Team analysis

2 Global resurgent virus, and prolonged downturnUS and Europe require significant quarantine measures through

much of the year; Asia faces a resurgence of infection leading to a

double dip slowdown

Africa outbreak contained

Most countries experience isolated cases or small cluster

outbreaks, but with carefully managed restrictions, there is no

widespread outbreak, and most economic impacts are driven

through global knock-on effects on trade, and travel

1 Global virus contained, and economic slowdownContinued recovery in Asia; Europe and US face a sharp downturn

but are able to control the epidemic and release most quarantine

measures by early Q3


Most countries experience isolated cases or small cluster

outbreaks, but with carefully managed restrictions, there is no

widespread outbreak, and most economic impacts are driven

through global knock-on effects on trade, and travel

4 Global resurgent virus, and prolonged downturnUS and Europe require significant quarantine measures through

much of the year; Asia faces a resurgence of infection leading to a

double dip slowdown”

Africa outbreak widespread

Significant outbreaks occur in most major African economies,

leading to a significant economic downturn though reduced

consumption, and global knock-on effects on trade and travel

Low High

Domestic transmission

Glo

bal

tran

sm

issio

n

Lo

wH

igh

Global situation Domestic situation

3 Global virus contained, and economic slowdownContinued recovery in Asia; Europe and US face a sharp downturn

but are able to control the epidemic and release most quarantine

measures by early Q3


Significant outbreaks occur in most major African economies,

leading to a significant economic downturn though reduced

consumption, and global knock-on effects on trade and travel


African countries can consider three major challenges around the COVID-19 crisis in the coming months


Implication

Global

COVID-19

pandemic

Africa

COVID-19

pandemic

Pressure on interest rates and currency devaluation

Rising deficits and increase pressure on debt markets

Limited access to hard currency

Reduced tax revenues

Oil impact

Economic

Fiscal

Monetary

Reduced household expenditure and consumption

Businesses – many of them SMEs -- under significant cost

pressure, potential of closure and bankruptcies

Lower productivity, job losses particularly for non-

essential sectors. Also, longer-term human capital issues

(e.g., delayed schooling)

Slow down in overall economic growth, acute in hard-hit

sectors (e.g., tourism), potential for contraction

ImpactEconomic challenge

F

D Limited movement of people due to

travel bans (domestic, international,

diaspora)

E Disruption to ways of working for

individuals, businesses and governments

Reduced government revenues for oil

exporters, but lower costs for oil

importers and consumers

C Delayed / reduced FDI as partners re-

direct capital locally

B Lower demand in global markets for

non-oil goods exports

Disruption in global supply chains

exposed to inputs from Asia, Europe and

the Middle East

A

Modelling on-going

Sources: McKinsey analysis

Disclaimer: Current modelling as of 3/29/20 assumes no fiscal stimulus packages

from governments, or monetary impacts of currency and credit ratings (fix 2018 prices).

The next model iteration will be more sensitive to these elements, and shared accordingly


Africa’s GDP growth could decline by between 3pp and 7pp depending on the scenarioRecall: Baseline GDP growth for 2020: 3.9% growth1

Last updated 3/29/20 – Subject to change as epidemiological situation evolves

Low High

Domestic transmission

Glo

ba

l tr

an

sm

iss

ion

Lo

wH

igh

Global situation Domestic situation

2 Global resurgent virus, and prolonged downturn


1 Global virus contained, and economic slowdown


3.90

2020 GDP Growth Projection

0.6

~3pp

Pre-COVID19 GDP growth Scenario modelled GDP growth

3.90

-1.00


~5pp 3.90

-3.30


~7pp

Source: Team analysis, AfDB African Statistical Yearbook

1. AfDB estimate, other analyst estimates range between 3.2% (e.g., UNECA) to 3.8% (e.g., Oxford Economics Research)





3.90

-1.50


~6pp

The economic loss across

scenarios range from

between ~3-7pp of GDP

In three out of the four

scenarios looked at, Africa

as a whole could be forced

into a recession

Across scenarios, Africa

COVID-19 effects (i.e. way

of working and limited

travel) is the most

significant lever,

accounting for between

~35-50% of total GDP loss.

Globally driven disruptions

(i.e. supply chain, non-oil

exports, and FDI) account

for about one third of total

disruptions, and the oil

effect accounts for the

remainder (20-30%)

Key insights


4 drivers in the COVID-19 pandemic will matter most for Nigeria’s economic growth

Economic implications of COVID-19 experienced globally

Oil prices

Consumer

demand

Reduction in number of people travelling because of health concernsTravel bans

Reduced household and business consumption due to restricted movement, travel ban,

and the knock-on effects of reduced government expenditure

Restricted

movement

B

Decline in oil prices to as low as ~$25-30/bbl could result in lost GDP, with knock-on

effects to economy via reduced government spending and exchange rate instability

Oil impactA

Investment and

capital inflowMovement restrictions of people and materials results in delayed or cancelled foreign

investment and construction

Decline in export revenue from non-oil goods because of lower demand in core marketsNon-oil exports

Disruptions in value chains lead to production losses due to shortage of inputsSupply chain

disruptionCTrade &

Investment

X Focus areas with greatest GDP impact for Nigeria

Detail to follow

D

Shrinking

wallets

Actual (and expected) health costs and job losses could lead to deep cuts in discretionary

spending and trade downs in non-discretionary spending

Last updated 3/29/20 – SUBJECT TO CHANGE AS EPIDEMIOLOGICAL SITUATION EVOLVES


Nigeria’s GDP growth could decline by between 6 to 11pp in 2020, depending on the scenarioBaseline GDP for 2020: USD 370bn, 2.5% growth1

Current as of March 29, 2020, Last updated 3/29/20 – subject to change as epidemiological situation evolves

Africa transmission

Glo

ba

l tr

an

sm

iss

ion

Global situation





2.50

-3.40


~6pp

Pre-COVID19 GDP growth Scenario modelled GDP growth

2.50

-5.80


~8pp2.50

-8.80


~11pp

Sources: McKinsey analysis, AfDB African Statistical Yearbook, AEO 2020

1. Based on AfDB baseline and projections, from the African Statistical Yearbook 2019 and African Economic Outlook 2020





2.50

-6.90


~9pp

Across all scenarios,

Nigeria’s economy looks

to be pushed towards a

contraction

The oil effect is the biggest

driver of GDP impact (40-

70% of total, disruption

impact across scenarios)

and also funds 65% of

budgeted revenue and

90% of foreign reserves

accrual

Uncontained, GDP growth

could fall to -8.8% (USD

~40Bn) with oil effect and

disruption to way of

working – particularly

consumer spend in F&B,

clothing and transport

account for >90% of the

total impact

Key insights

Africa Transmission

Contained Widespread

Co

nta

ine

dR

es

urg

en

t


What are potential mitigation measures?


Africa faces a set of unique challenges in this crisis


Challenges Description Implications

Sources: McKinsey analysis, Africa’s Business Revolution by Acha Leke, Mutsa Chironga and Georges Desvaux; UN Population Prospects 2019; ILO;, State of Small Business Report South Africa 2018;; World Bank WDI

, MGI Power of Parity Africa 2019

Non-exhaustive

Fragile healthcare

system

Limited fiscal capacity

Low ratio of public revenues to GDP across Africa (19% vs 30% in Brazil and

37% in the UK)

Debt servicing absorbing 22% of revenues in Africa vs 8% in India, 11% in Brazil,

17% in Mexico

Varying levels of transparency in management of funds, particularly large inflows

during emergencies

Difficulty to replicate stimulus packages as

other regions have implemented

Countries may need support from

development partners and foundations

Radical transparency needed in how funds

are managed

Highly informal

economies with many

small and micro

businesses

SMEs create 80% of the region’s employment (50%in the EU, 60% in the US),

with limited ability for staff to work from home (e.g., primary industry, power outages,

cost of data)

The informal sector makes up to 55% of the economy in SSA compared to 40%

in Latin America and India and 15% in OECD

May need to support in particular the small

and medium enterprises in addition to large

businesses

Economy revitalization may need extend to

informal parts of the economy

Young and poor

demographic

50-70% of urban dwellers live in slums (vs 23% in Latin America, 17% in India) in

the fastest urbanizing region in the world

Younger population with median age of 19 (vs 27 in India and 43 in Europe) with

~80m youth in vulnerable employment, and ~110m not contributing to the economy

School closure impact is high and has long-term consequences (e.g. increasing

drop out, currently 42% vs 19% OECD average)

Consider effectiveness and implication of

quarantine methods in light of poor living and

sanitary conditions

May need to address long-term implications

of some measures (e.g. closure of educational

institutions)

Low number of healthcare professionals – 0.25 doctors for 1000 people in Africa

vs. 1.6 in Latin American and 3 in OECD on average

Low number of hospital beds – average of ~1.4 beds / 1000 people vs 2 in Latin

America and 4 in China; limited testing and treating capability

May need to expand healthcare capacity and

accessible healthcare solutions (e.g. mobile

health points for testing and medicine

distribution)

https://www.un.org/esa/socdev/documents/youth/fact-sheets/YouthPOP.pdf

https://data.worldbank.org/indicator/SL.UEM.1524.FE.ZS

https://www.mckinsey.com/featured-insights/gender-equality/the-power-of-parity-advancing-womens-equality-in-africa


Four sets of stakeholders can consider working together to addressthe crisis in Africa

Development PartnersMultilateral institutions

Bilateral institution and country partners

Foundations

Private Sector

Businesses

Private Sector Associations

Public SectorGovernments

African Union

Regional Economic Bodies

CitizensIndividuals

Civil SocietyCitizens

Public Sector

Private

Sector

Development

Partners

Combatting the

Covid-19 Crisis

in Africa


Governments may need to focus urgently on five key areas

Contain the epidemic Prepare the health ecosystem

Protect jobs Support most vulnerable populations

Digital tracking

and monitoring

Proactive

communication

Anticipate

and manage

the health

crisis

Secure food

supply chain

and essential

services

Ensure

support for

vulnerable

populations

Anticipate

and manage

the impact

on the

economy

Drugs and medical

equipment (testing

kits, masks,

ventilators, etc.)

Infrastructure

(hospitals, beds,

etc.)

Health

professionals

Diagnostic,

Testing, and

isolating

patients

Preventive

measures (e.g.,

restrictions,

lockdowns)

Secure the food supply Maintain the access to essential services

Setup and

operationalisation

Measures to

protect jobs

TelecomsHealth &

EducationUtilities Others

Tracking

and

monitoring

Appropriate

pricing of

priority products

Supply of

priority

products

Economy Short term stimulus Prepare for recovery

Setup

National

Nerve Center

Scenario

analysis

Impact on

economy and

pubic finance

Measures to

help firms

survive the

crisis

Anticipation of the post crisis and

preparation of the ‘next normal’

Retrain existing

workforce for

current crisis

needs

Social safety net

mechanisms and

distribution

Others

Measures to

maintain

financial

stability

A

x Detail follows

B

C

D

E


Private sector companies may need to consider shifting their operating model/ governance structure to a crisis response mode …


A shift from business as usual … … to remote agile model

2-3 months A few days to 2 weeks

Goes to business Goes to legal Goes to operations

Experience from other markets suggests that businesses across key markets outside of South Africa

may have 2-4 weeks to make shifts in how they serve clients, support staff members and manage

stakeholders

Long decision making process

Multiple steps and hand-offs in decision implementation

Fragmented teams working in silos

Decentralised decision making

Quick decision making

Streamlining decision making and relaxing onerous

governance requirements

Single team reporting directly to CEO

Semi-autonomous team with decision making authority


Private Sector

focus areas

… and focus on 6 key areasBased on discussions with risk and health professionals and more than 200 companies across sectors


BWorkforce

protection

CSupply Chain

Stabilization

DCustomer

engagement

EStress-test

financials

AOperate nerve

center

FGovernment

support

Tiering (all/some/no WFH) | Infra setup (VPN, laptops, desktops) | Broadband availability3 Personnel & contractors

Staggering work shifts/times | Prevention (e.g., Social distancing) | Closures4 Facility & On-site norms

Multi-channel communications | Confidential reporting mechanisms | Source of truth2 Two Way Communication

Critical part identification | Parts rationing | Location optimization 2 Inventory management

Operational impact assessment | Production capacity optimization3 Production & Operations

Prevention interventions across customer journey | Cust. team training | Execution monitoring2 Customer protection

Relevant scenarios based on latest epidemiological & economic outlook1 Scenario definition

Financials in different scenarios, especially working capital requirements2 Financial stress tests

Local & federal regulators and public health officials | Support to Government5 Health & Govt engagement

Portfolio of policies and actions incl. prevention and incident response1 Policy & Management

Customer comms re: COVID-practices | Fact-based reports on issues | Situation comms3 Customer outreach

Comms to B2B customers (e.g., microsite) | Scenario-based risk comms1 B2B transparency

Ports | Logistics capacity pre-booking | Route optimization5 Logistics

Cross-tier risk transparency | Supplier restart | Order mgmt. | New supplier qualifications1 Supplier engagement

S&OP SKU-level demand signal estimates by macro scenario | Production and sourcing plan4 Demand management

Trigger-based portfolio of actions (across all workstreams above)2 Portfolio of actions

Align leaders on scenarios | Roundtable exercises 3 Leadership alignment

Offer expertise support to Governments (e.g., via the National nerve center)1 Sharing expertise

Implement supportive measures (e.g., reduced data costs, delayed interest payments, etc.)2 Providing support

Single source of truth for issue resolution & tapping surge resources where needed1 Issue map & management

Monetary and product donations to funds for support of vulnerable population3 Donations


So, what do all these mean for us?B

McKinsey & CompanyMcKinsey & Company 12

Early observations of Italian market

Sources: expert calls, “#Coronavirus Nuovi dati sulle vendite della gdo in store e online”, GDOWeek, March, 2020

Grocery sales overall increased by 12.2% in the last week of February due to

“Coronavirus effects”, with South of Italy registering the higher increase (+15.8%).

The growth was focused on long-life food (e.g., pasta +58%, flour +81%, frozenfood

+24%) and home/personal hygiene products (+24.9% and +19.6% respectively).

1 | Stock-up of essential and

non-perishable goods

PRELIMINARY

In the short term, increases in purchases of essential and non-perishable goods were observed, which however do not appear to have

a structural impact, as well as an increase in E-commerce share. The E-commerce share increase is expected to last in the post-crisis

scenario as some of the new customers will continue using the services (e.g.,Amazon or grocery delivery).

3 |Downward compensation

after initial spike

A drop of 15.6% after the first week of emergency is registered for essential and non-

perishable goods in the high-risk area of northern/central Italy, vs. the previous increase.

In contrast, South of Italy still showed an increase in grocery in the first week of March,

as it was not yet considered a high-risk area.

Cash & Carry formats went down by 9%, showing difficulties in the hospitality and catering

sectors. Also, discretionary goods like luxury and automotive had a significantdecrease.2 | Drop of discretionary goods

4 |E-commerce share increase

and new customers

E-commerce went up from the last week of February by 81%, 30 p. points more than the

previous weeks. Esselunga had a 2x spike in online home-delivery volumes since mid–

February (forced to suspend orders several times a week). A high increase was observed in

usage of food delivery platforms (e.g., Glovo and Deliveroo) and Amazon Prime services.

CURRENT AS OF MARCH 27, 2020


Learnings from China: On-line penetration increased significantly, in particular for categories with higher purchasing frequency

Source: Inmediato Mediaplus, Apptopia, Dday.it, GDOWeek, Expert interviews, Ethnographic research, Web search

New online consumers

+10% Increase in DAU of

food delivery

platforms

+15% Increase in

average DAU for

E-commerce

websites vs.

previous year

Explosion of e-commerce volumes

E-commerce

volumes vs. last

week of February

+81%

5-10x Spike in online

home-delivery

volumes

2-3x Click & Collect

pick-ups

Esselunga OnLine,

Daily Average Users

Food Delivery Apps,

Daily Average Users

Delivery time increased due to sudden increase of demand for players across all industries

E.g., lead team from order to delivery ~3 weeks in Milan, ~1-2 weeks in other regions –Amazon Prime lead time ~1 week



Learnings from China: People mobility constraints changed the media channel usage

Consumption of new digital media accelerated drasticallyOn-top, traditional media channel also

accelerated during the outbreak

Source: Nielsen, Ansa.it, Inmediato Mediaplus, Auditel, Polizia di Stato, Web search, Team analysis

Average Time on Screen,

hours:minutes per day per viewer

20202019

5:32

6:53

+24%

Internet consumption

Engagement

Regional and local news show the highest

increase in viewership, with 24h news

channels increasing >50%, on average

Perspective on the Italian market

Increase in social network engagement

associated with an increase in

misinformation and online thefts / scams

+80-100%

Fixed data consumption

+25-30%

Mobile data consumption

+40-50%

Facebook usage

+400%

Online gaming

internet traffic



Learnings from China: a “consumption shift” short term, but confidence

could come back after the stormMobile survey to understand Chinese consumer behavior during COVID-19

Source: 2020 February COVID-19 mobile survey; COVID-19 mobile survey 3/21-3/23/2020 N = 611 Sampled and balanced to match CN gen pop 18-65 years old

1.Skincare and make-ups section only have female samples

Consumption shift during the peak of the crisis

B

50-70% Reduction in consumption

for discretionary products

Of consumers have not

purchased discretionary

and impulse products

30-40%

Increase in online

penetration+15-20%

>6m Time to full recovery not

unlikely looking at MERS

and SARS esp. in

apparel & luxury

Confidence and emerging shifts after…

Of Chinese consumers

are optimistic about

buying same or more after

recovery

>80%

+20-30% Lingering effects in food

as foodservice still not fully

open

Expected stickiness of

online penetration after

the crisis

+3-6 p.p.

Male shoppers at offline

stores during crisis,

majority of which are 30-40

years old

>50%

B…that appear lasting

Of Chinese consumers are

likely to permanently buy

more groceries online

>55%

-15% Decrease in intent of

dining in restaurants.

Continued shift to

home-delivery and RTE

Of shoppers have shifted

away from primary store;

~50% not intending to shift

back

>25%

have switched brands

based on convenience and

promo/display, of which

20% intends to stick

~33%



Learnings from China: During February peak, some categories experienced complete “stop” of purchasing, others moved online

Category

% respondents with no

purchase during COVID-19

Skin-

care

49%

Personal

care

33%

Snacks

16%

Fresh

food

13%

Baby

care

14%

Alcohol

31%

Purchase channels

pre vs. during

COVID-19 situation

Home

cleaning

15%

5238 50

3661

3753 40

5437

7149 56

3959

33

4862 50

6439

6347 60

4663

2951 44

6141

67

Du

rin

g

Pre

Du

rin

g

Make up

44%

% respondents will consume

same or more post COVID-19

85% 86% 78%84% 88%82% 79%82%

More offline More online

Pre

Pre

Du

rin

g

Pre

Du

rin

g

Pre

Du

rin

g

Pre

Du

rin

g

Pre

Du

rin

g

Pre

Du

rin

g

Source: 2020 February COVID-19 mobile survey



COVID-19 is likely to have varied impacts across Consumer Goods sub-categories

Limited impact on demand

1. Based on interviews with retailers

Limited near-term impact Significant near-term impact

Key questions business leaders

must ask

Depth of disruption: How deep are the demand reductions?

Length of disruption: How long could the disruption last?

Shape of recovery: What shape could the recovery take?

Implications for your business:

How could your categories and customers be impacted?

What are knock-on effects and scenarios for revenue, profits, cash and liquidity during the crisis and subsequent recovery?

Strong demand increase for long shelf-life, canned/frozen and

staple products (e.g., flour, noodles, rice, pasta)

Foodservice focused businesses with up to 80% demand decline1

Food

Limited impact on overall consumption, but short term increase in

selected non-alcoholic beverages (e.g., water)

Significant reduction in foodservice demand

Beverages

Reduction in select discretionary products (e.g., cosmetics,

perfume)

Significant impact on premium and travel-related products

Beauty and

personal care

Strong demand increase for OTC productsConsumer

Health

Demand increase in basic and essential products (e.g., tissues,

toilet paper, soap)

Reduction in discretionary spending (in particular higher value)

Household

products

Mid-term impact expected from lower incomes and increased

unemploymentHousehold

durables

Tobacco


Directional


Emerging reality for CPG companies in Nigeria

Additional questions to explore

COVID-19 is, first and foremost, a global humanitarian challenge

— How do we ensure employees safety

— How do we protect retail customers

— How do we demonstrate purpose

— What can we do to help save lives

How much business impact from COVID-19 disruption to forecast in the short to mid-term?

How resilient is our business model to volatility and disruptions?

How strong is our balance sheet and cash-flow (e.g., can we fund debt repayment and investment needs)?

What value-creating M&A opportunities can we explore, given recent depressed valuations?

How do we monitor performance and manage investor communication (especially over the next two quarters)?

Local sourcing wins

Modern trade and eCommerce already seeing big uptick in

urban areas and could see sticky growth (up to 20% volumes)

Stronger demand for longer shelf-life products, dry goods,

beverages (preparations for lock downs?), reductions in spend

on cosmetics, apparel, luxury

Battle for digital ‘share of mind’ – digital marketing (e.g., paid

search/ social/ display) to intercept demand on online channels

Sales gains from MT,

eCommerce and for

basic goods and

beverages

Trade downs from

mainstream to value

Superior distribution

and logistics reassert

as must-have assets


Pressure on profits – USD-based input costs could grow in

Naira terms; shrinking consumer wallets to keep lid on pricing

Sourcing challenges from impacted countries likely to drive

longer lead times and some expected stock outs in Q2

New regulation to ‘protect local sourcing’ and to raise non-oil

revenues expected (e.g., higher import duties, other taxes)

Across most categories, sales of mainstream portfolio expected

to shrink as value segment gains from trade downs

In the last recession, trade downs proved sticky and reshaped

many companies’ P&Ls

JVs with logistic providers growing (started with Retail players,

now manufacturers) as traditional distributors struggle to meet

new logistics challenges

Traditional trade sales shift from open markets to neighborhoods

creating new look at Contract Van Sales model

Explosion of small (trend where niche brands gain share) could

reshape competitor dynamics as branded demand declines in

favor of any availability

For discussion: what are the implications for CPG companies?


Backup1. Africa impact sizing – methodology

2. Nigeria imports – breakdown by origin


4 step approach to size economic impact of COVID-19 for Africa

1. Direct pass through to household spend

I

II

III

IV

Identified four economic scenarios for

Africa, based on potential trajectories of the

global and domestic (i.e. community

transmission) epidemiological scenarios

Scenario 1: Extensive virus spread and

economic slowdown globally; contained

outbreak in Africa

Scenario 2: Extensive virus spread and

economic slowdown globally; widespread

outbreak in Africa

Scenario 3: Resurgent virus and prolonged

economic slowdown globally; contained

outbreak in Africa

Scenario 4: Resurgent virus and prolonged

economic slowdown globally; widespread

outbreak in Africa

Selected 6 “anchor” countries that comprise ~60%

of GDP as foundation of the model (i.e. Angola,

Kenya, Egypt, Morocco, Nigeria, South Africa)

Determined the financial impact of six shocks

categories on our anchor countries. Then used

GDP and jobs multipliers to estimate economic

impact (GDP growth) by sector

• Oil impact: changing demand and supply

(e.g. OPEC, Russia) on prices of oil & exports

• Disruption of global supply chains

• Lower export demand

• Delay / reduction in FDI

• Limited movement of people (tourism,

domestic)

• Disruption to ways of working for

businesses and individuals1

Continue to size and add new countries to the

model to scale-up economic impact by sector

Detail follows

A

B

C

D

E

F



Currently, 70% of all imports to Nigeria come from countries impacted by COVID

SOURCE: AfDB, WITS, Johns Hopkins CoronaVirus Impact Centre

>5000 500 - 5000 >500COVID-19 Infection Rate

Nigeria’s import is ~12% of GDP;

majority of which are intermediary

goods

Heavy machinery and mineral oils

account for 80% of Nigeria’s

import

China is currently in recovery

mode and a moderate impact to

supplies is expected

Europe and the USA are still in

economic shutdown and this will

impact Nigeria sourcing

Key Takeaways2019 Import Origin, % of Total Imports (46 bn USD)


COVID-19: Nigeria economic impact & implications for CPG · 2020-03-29 · economic growth Economic...

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Transcript of COVID-19: Nigeria economic impact & implications for CPG · 2020-03-29 · economic growth Economic...