Monday, May 9, 2016 11:47AM/FBNQuest Research
Nigeria’s food and accommodation sector stands out as one of the country’s vibrant industries. Industry sources suggest that it accounts for about 5% of the country’s labour force.
The most recent data on job generation statistics from the National Bureau of Statistics (NBS) show that accommodation and food created 1,190 jobs in Q3 2015 (2.9% of total formal jobs).
Last year the sector grew by 2.3% y/y compared with 18% in 2014. The slowdown in growth reflects the current macro challenges which have negatively impacted consumer spending.
The inflation data for March show that prices in the Restaurant and Hotel sector rose by 8.7% y/y compared with 9.0% recorded in February. This component has a 1.2% weighting in the index.
A recent survey carried out by an indigenous Credit Rating and Risk Management Company disclosed that close to 80% of reservations are made by corporates. The fact that corporates are less sensitive to price movements than retail should provide some comfort for hotels.
FX sourcing issues have contributed to the sector’s sluggish growth. The CBN’s ban on 41 (imported) items from accessing the fx window is expected to ease pressure on Nigeria’s import bill over time. In the fourth quarter of 2015, food products accounted for 11% of sectoral utilisation of fx compared with 13% recorded in the previous quarter.
The challenges faced with importing food inputs should drive restauranteurs to source inputs locally which could boost growth in the agriculture sector.
On Friday, news wires reported the signing of the 2016 budget by President Buhari. This should boost economic activity, even if belatedly, in H2 2016.