VANGUARD
Manufacturers of consumer goods are counting their losses to high cost of raw materials due to inflation and exchange rate volatility, which resulted to N266 billion loss in 2023, from profit of 320.5 billion in 2022, a development which would likely keep the prices of goods high in the months ahead despite positive trends in exchange rate in recent weeks.
The manufacturers have recorded about 25.5 per cent rise in cost of raw materials in 2023 and Financial Vanguard findings indicate that current stocks of raw materials in their warehouses were procured at even higher cost through first quarter of 2024.
While most of them tracked by Financial Vanguard have recorded erosion of profit, declaring massive losses in their full year financial statement, the companies have strategized to recover the losses through inflation targeting price mark ups in 2024.
Nigeria’s headline inflation surged to 33.2 percent at end of First Quarter 2024, from 21.8 percent at the beginning of last year while exchange rate surged to average N1500/$1 in the Q1’24 from N650/ $1 in the corresponding period of last year.
The manufacturers said these two developments resulted in an unprecedented rise in the cost of raw material inputs and cost of producing consumer goods, thereby resulting in massive rise in prices of goods and services which Nigerians have continued to bear.
Financial statements of some leading Fast Moving Consumer Goods Companies, FMCG, showed that the amount spent by the companies on raw materials’ procurement rose to N2.77 trillion in 2023 up from N2.21 trillion in 2022, indicating a 25.5 percent increase.
The manufacturers said as a result of the increase in the cost of raw materials, the cost of sales jumped 24.8 percent to N3.53 trillion in 2023, from N2.83 trillion in 2022.
Moreover, the companies spent more than half of their revenue on raw materials in 2023. Specifically, the companies’ spent 57.8 percent of their total revenue of N4.795trillion in 2023 on raw materials procurement.
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