LEADERSHIP
Six manufacturing companies have suffered a combined loss of N166.3 billion in their nine months financial results for the period ended September 31, 2023.
The companies listed on the Nigerian Exchange Limited are Nestle Nigeria, Cadbury Nigeria, Dangote Sugar Refinery, Nigerian Breweries, International Breweries and Champion Breweries.
LEADERSHIP reports that rising interest rates and naira devaluation have continued to impact negatively on the operations of the manufacturing sector.
The naira devaluation has led to increased operating costs for multinationals whose major costs, including finance costs, are denominated in foreign currencies.
Meanwhile, the Central Bank of Nigeria (CBN) increased the monetary policy rate, also known as its benchmark interest rate, for the eighth consecutive time in July by 25 basis points to 18.75 percent.
This puts more pressure on the margins of FMCG companies already dealing with double-digit inflation rate and weak purchasing power of cash-strapped consumers.
Speaking on the development, an economist at BancTrust & Co, Omobola Adu said, “We are seeing the result of the naira devaluation which is affecting the financial performance of companies with foreign currency-denominated loans in their books.”
He said coupled with high-cost pressures, which are reducing people’s spending on discretionary items, FMCG firms’ challenges have worsened, saying that the impact of the FX devaluation made it worse.
Nigerian Breweries, in a statement signed by the company secretary/legal director, Uaboi Agbebaku, said a combination of foreign exchange losses due to the devaluation of the naira and higher interest costs resulted in the company’s net loss during the period.
On his part, deputy president of the Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, stated that “a lot of manufacturers are getting more money from banks at a higher interest because of the rising inflation.
“Manufacturers need more working capital because of the high cost of production in order to meet the same production capacity,” he added.
Former minister of Industry, Trade and Investment, Olusegun Aganga, recently said, “Finance is insufficient and the cost of funds in Nigeria is high, typically between 15 per cent and 20 per cent. Relative to its competitors, Nigeria has a remarkably low domestic credit to GDP ratio and the credit, too expensive due to a combination of factors including high treasury rates, high inflation, infrastructure deficit, inefficiencies, among others.
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