Despite tough times, four consumer goods manufacturers improved financially last year. NASCON Allied Industries Plc, Unilever Nigeria Plc, BUA Foods Plc, and Dangote Cement Plc collectively made N589.4 billion after-tax profit, up from N483.6 billion in 2022. According to Oluebube Nwosu, a consumer goods analyst at Vetiva Capital, these firms focused more on local production and raised prices, reducing their exposure to foreign exchange risks.
Bolade Agboola, an analyst at Chapel Hill Denham, highlighted that some companies remained profitable due to their strategic planning and lower exposure to foreign exchange fluctuations. Dangote Cement, for instance, benefited from its operations outside Nigeria, which helped hedge against currency risks.
On the other hand, companies like Cadbury, Nigerian Breweries, Nestle, International Breweries, and Dangote Sugar faced challenges, collectively posting an after-tax loss of N346.7 billion last year. In contrast, in 2022, they had a combined after-tax profit of N117.4 billion, with only International Breweries posting a loss of N21.6 billion.
BUA Cement’s profit declined to N69.45 billion from N101.0 billion, while Lafarge Cement’s profit decreased to N51.1 billion from N53.7 billion.
After President Bola Tinubu announced the removal of petrol subsidies during his inauguration on May 29, pump prices soared, now exceeding N600. The naira’s value also dropped significantly following the currency’s floatation.
In June, the Central Bank of Nigeria consolidated all segments of the FX market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.
The naira has lost value against the dollar and other major foreign currencies.
As of March 26, 2024, the official exchange rate dropped from N463.38/$ to N1382.9/$. On the parallel market, it’s N1,350/$ compared to 762/$.
Increasing inflation has made it harder for consumers to buy things, while businesses are struggling with higher costs.
According to the National Bureau of Statistics, Nigeria’s headline inflation rate increased for the 14th month in a row in February, reaching 31.70 percent from 29.90 percent the previous month.
Food inflation, which makes up half of the inflation rate, rose to 37.91 percent from 35.41 percent.
The rising inflation has led many small businesses to close, worsening unemployment. The unemployment rate rose to 5.0 percent in the third quarter of last year from 4.2 percent in the previous quarter.
It was reported that 11 consumer firms sold fewer goods on credit last year due to the rising inflation, affecting their financial performance.
The firms’ latest financial statements show that total trade and other receivables increased by 40 percent to N843.8 billion from N602.5 billion. This growth is lower than the 74.2 percent increase in 2022.
Femi Egbesola, the national president of the Association of Small Business Owners of Nigeria, explained that manufacturers are avoiding selling goods on credit due to inflation reducing the value of money over time. This means that collecting money back after selling on credit won’t be as profitable.
He also mentioned that raw material costs may increase by the time debtors eventually pay for goods bought on credit.
“More companies are now avoiding credit sales. Similarly, the Micro, Small, and Medium Enterprises in their value chain that supply these companies are no longer accepting local purchase orders but are opting to supply and get paid immediately,” Egbesola said.
