ABUJA/LONDON Oct 5 Diageo has scrapped
plans to lift its stake in Guinness Nigeria due to
tough market conditions there, the drinks company said on
The decision by Diageo, maker of Johnnie Walker Scotch and
Smirnoff vodka, is the latest blow for the West African economy,
which is headed for its first full-year recession in 25 years
following a plunge in oil prices.
Diageo last year said it planned to buy another 15.7 percent
of Guinness Nigeria for up to 41.37 billion naira, raising its
stake to 70 percent. At last year's exchange rates, that would
have been worth about $208 million.
Diageo said on Wednesday it would not proceed with the
offer, choosing instead to focus its resources on continuing to
support Guinness Nigeria. Last month it gave the unit a $95
million loan to help it cope with dollar shortages.
Limited access to foreign currency has contributed to other
businesses pulling back from Nigeria, including airlines Iberia
Yet British company PZ Cussons said in July
liquidity had begun to improve following Nigeria's decision in
June to lift the currency peg, which led to a sharp devaluation
of the naira.
Guinness Nigeria shares were flat at 93 naira on the Lagos
bourse on Wednesday. The shares are down 19 percent this year.
The brewer reported its first full-year loss in 30 years for
fiscal 2016, hurt by the ongoing recession in Africa's largest
economy and the currency crisis brought on by the impact of low
oil prices. Nigeria's economy is likely to contract by 1.3
percent this year, the head of the government's statistics
office said on Wednesday.
"Diageo has confirmed that it maintains a positive outlook
for Nigeria in the long term and that it expects the market to
continue to grow," Guinness Nigeria said in a statement.
"Nigeria remains a key strategic market for Diageo."
A source familiar with the company's thinking said a future
rights issue could be another potential way for to recapitalise
Diageo is predominantly a spirits company, but says that
owning Guinness beer helps its footprint in Africa, where a
growing number of middle class consumers are drinking more
(Reporting by Chijioke Ohuocha and Martinne Geller; Editing by