Naira depreciation costs Cadbury, Guinness, others N472bn in nine months — Report

RIPPLES NIGERIA

A new report by Meristem Securities has shown that the depreciation of naira cost some major fast-moving consumer goods companies, including Cadbury, Guinness Nigeria, and Nestle the sum of N472.3bn in the first nine months of 2023.

The report titled: “Shifting Landscape for Consumer Goods Players,” noted that following the liberalization of forex windows in June 2023, the value of the Naira against the dollar devalued significantly by 45%.

It noted that by December 2023, the naira had reached an all-time low, trading at N1099.55 to a dollar in the official window and N1310/USD in the parallel market.

The report read: “This depreciation of the national currency has left an indelible mark on consumer goods companies, particularly those heavily reliant on the importation of raw materials for their production processes, the weakened Naira translated into significantly higher import bills, thereby leading to a substantial increase in production costs.

“Moreover, companies holding foreign-currency-denominated debts, like Nigerian Breweries Plc, Nestle Nigeria Plc, and Guinness Nigeria Plc, Cadbury Nigeria Plc, faced higher debt burdens, more expensive letters of credit, and substantial.

“This placed significant strain on the profitability of these industry players, leading a number of these players to report after-tax losses for both Q2:2023 and Q3:2023.

“As of 9M:2023, foreign exchange losses for major players in the industry stood at NGN472.35bn, further underscoring the magnitude of the challenge posed by the naira’s depreciation on the financial health of consumer goods companies.”