Easing Inflation, Stable Naira Set to Power FMCG Sector’s Q3 Surge

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Olori Uwem

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Mar 18, 2024
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Easing Inflation, Stable Naira Set to Power FMCG Sector’s Q3 Surge

Analysts project stronger margins and improved consumer spending

Overview: FMCG Sector Poised for a Strong Quarter

Nigeria’s Fast-Moving Consumer Goods (FMCG) sector is gearing up for a strong performance in Q3 2025, buoyed by cooling inflation, a firmer naira, and improving consumer purchasing power.

According to a new report by CardinalStone Partners, titled “Q3’25 Earnings Preview: Strong Macros to Support Earnings,” the easing macroeconomic pressures are expected to expand profit margins across major FMCG companies.

“We expect the FMCG sector to deliver broadly stronger Q3 results year-on-year, underpinned by improving consumer sentiment, easing inflationary pressures, and a modest appreciation of the naira,” the report stated.

Why Analysts Are Optimistic

CardinalStone’s outlook points to a recovery in demand and volume growth, particularly among food and beverage producers.

Key drivers include:
• Improved household purchasing power
• Steady demand for essential products
• Moderating input costs (especially packaging and raw materials)
• Stable foreign exchange rates

The report noted that “most companies should benefit from input cost moderation, aided by a more stable FX environment.”

Brewers: Seasonality Still a Challenge

While the overall sentiment is positive, the report cautioned that seasonal trends may dampen brewery earnings. Historically, Q3 is a weaker quarter for brewers due to fewer festivities and public holidays.

For instance:
• Nigerian Breweries (NB) is expected to report a strong year-on-year performance but slightly weaker quarter-on-quarter results due to seasonal factors.

• Guinness Nigeria is projected to maintain resilience, supported by its non-premium brands, which perform better during low-demand periods.

Despite these headwinds, both companies are set to enjoy strong margins thanks to cost moderation and reduced FX pressures.

Food & Household Goods: Strong Growth Expected

The food and household goods segment is projected to record robust, volume-driven growth, reflecting better consumer spending and sustained demand for staples.
• Nestlé Nigeria is expected to post strong revenue growth, fueled by higher sales volumes across key categories and improved consumer sentiment.

• Unilever Nigeria should see quarterly and yearly growth, supported by increased sales volumes and lower inflation.

• UAC Nigeria is forecast to sustain its upward trend, aided by operational efficiencies like biomass energy use and a streamlined distribution model that reduces costs.

CardinalStone added: “We anticipate a moderation in cost-to-sales ratio as inflationary pressures ease and the naira strengthens, paving the way for margin expansion and improved profitability.”

Sugar & Flour Producers: Mixed Outlook

For sugar producers, the picture is cautiously optimistic:
• Dangote Sugar is expected to grow faster than in Q2 2025, supported by an 8.7% drop in global sugar prices and a 3.65% naira appreciation.
However, its high leverage remains a concern, as elevated borrowing costs could affect net profits.
• BUA Foods is set for significant revenue growth, particularly from its Bakery Flour segment, with margins expected to improve under a more favorable inflation and FX environment.

Overall Outlook: Growth Momentum to Continue

CardinalStone concluded that Q3 2025 will likely show broad-based recovery for FMCG companies as easing inflation and currency stability restore consumer confidence and reduce operating pressures.

In essence, Nigeria’s FMCG sector is on the rebound — driven by stronger demand, cost efficiency, and a friendlier macroeconomic climate.

The message from analysts is clear: “Stable naira + easing inflation = stronger margins and happier investors.” ✨