Africa is the flavour of the day for many consumer products companies, but there are few like PZ Cussons that can already claim to make half of their global revenues in one African country, namely Nigeria.

Yet, as is the case in many emerging markets, political uncertainty can take a toll on business, a fact that the British soap company highlighted in its half year trading outlook on Thursday. The company, which owns Imperial Leather and Carex and makes half of group sales from Nigeria, blamed uncertainty surrounding next year’s election for flat performance in Nigeria in first half of its financial year.

The connection between the election and one of life’s most basic needs is not obvious. But Brandon Leigh, PZ Cussons’ financial director, explained to beyondbrics that it’s all about Nigeria’s banks.

Uncertainty over the outcome of Nigeria’s 2011 elections has led to banks introducing tighter controls that have reined in lending, he said.

This affects soap sales because Nigeria does not have an effective wholesale distribution system. Instead local shop owners buy stock directly from PZ Cussons’ 26 depots across the country. Tighter liquidity means these shop owners are struggling to find the money to fill their shelves with soap.

A central bank crackdown on loose practices that began last year has also contributed to a sudden slowdown in private sector credit growth, but an analysis by the World Bank has shown this was mainly caused by banks unwinding margin loans rather than cutting credit to small businesses and manufacturers.

Despite the slowdown in activity, PZ Cussons said its forecast remained in line with management expectations because of other emerging markets in Asia where profits were higher, in particular in Indonesia where the group sells baby care products and has 43 per cent of the market.

Leigh said: “Asia is the region for us at the moment … we are turning our focus to Asia now”.

But political uncertainty is not the only problem in African countries like Nigeria. As Razia Khan, head of macroeconomics at Standard Chartered told beyondbrics earlier this year, the Nigerian government’s priority should be to drive supply side dynamics and allow for its retail sector to develop.

Until then, it looks like tighter credit means some Nigerians may find it a bit harder to buy a bar of soap. It also means PZ Cussons will have to look elsewhere for strong growth it long secured from its African star.

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