Several major fast-moving consumer goods companies, including Cadbury, Guinness Nigeria, and Nestle, suffered a collective loss of N472.3 billion due to naira depreciation during the first nine months of 2023.
The report by Meristem highlighted that high inflation rates significantly pressured production costs in the consumer goods sector, particularly affecting food and beverage manufacturers.
The weakened naira led to higher import bills for companies relying on the importation of raw materials, resulting in increased production costs. Consumer goods companies, with foreign-currency-denominated debts, faced higher debt burdens, expensive letters of credit, and substantial challenges, impacting profitability.
The report noted that foreign exchange losses for major industry players reached NGN 472.35 billion by 9M:2023, emphasizing the magnitude of the challenge posed by naira depreciation. Nigeria’s inflation, reaching its highest levels in over 18 years, had profound effects on consumer behavior, purchasing power, and spending patterns, impacting the overall industry dynamics.
Despite positive signs such as anticipated price hikes and robust sales during the festive season, concerns persist over ongoing inflation surges, naira depreciation, and foreign exchange liquidity challenges, which are expected to weigh on companies’ profitability. The report predicts that consumer goods companies will engage in business restructuring, strategic acquisitions, and expansions to navigate challenging operating conditions in the Nigerian market in 2024. Adaptation of product categories to remain relevant and innovative is anticipated to be a key strategy for these companies.
This follows earlier reports indicating that several top Nigerian firms lost N960.18 billion in the second quarter of 2023 due to the steep devaluation of the naira following changes in forex policies.
