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Manufacturers incur heavy losses as forex crisis, inflation bite harder
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Manufacturers incur heavy losses as forex crisis, inflation bite harder

In apparent reflection of the depreciation in the value of the Naira coupled with the sustained inflationary pressure, the cost of raw material input for consumer goods companies rose by 18.5 percent

  • PublishedSeptember 25, 2023

In apparent reflection of the depreciation in the value of the Naira coupled with the sustained inflationary pressure, the cost of raw material input for consumer goods companies rose by 18.5 percent in the first half of 2023 (H1’23), a development which undermined the companies’ profitability.

Nigerians have been battling with persistent increase in the prices of goods and services, aggravated by insecurity, naira depreciation and global supply chain disruption due to the rising barriers from the escalation of the Ukraine/ Russia war.

Data from the National Bureau of Statistics (NBS) showed that the inflation rate in Nigeria closed H1’23 at 22.79 percent.

The figure has since risen to 25.8 percent as at last month and is projected to rise further this month, possibly sustained to year end.

Also, the Naira value against the USDollar which stood at N448.04/US$ at the beginning of the year (2023) crashed to N823.13/US$ as at end H1’23 following the Central Bank of Nigeria (CBN) foreign exchange reforms in mid-June.

The severity of this trend is reflected in the increased cost of producing consumer goods, which are mostly essential commodities used regularly by households. These include foods and beverages, toiletries, over-the-counter medicines, cleaning and laundry products, plastic goods, and personal care products, amongst others.

Financial Vanguard findings from the financial statements of eight major Fast Moving Consumer Goods, FMCGs, companies listed on the Nigerian Exchange Limited (NGX), including Nestle Nigeria Plc, Cadbury Nigeria Plc, NASCON Allied Industries Plc, Dangote Sugar Refinery Plc, BUA Foods, International Breweries Plc, Champion Breweries Plc, Nigerian Breweries and two industrial goods companies – Meyer Plc and Berger Paints Plc showed that the amount spent by the companies on raw material procurement rose to N634.22 billion in H1’23 up from N535.09 billion in H1’22, indicating an 18.5 percent increase.

Consequently, the ratio of raw materials cost to the total cost of sales for the companies rose to 79.64 percent in H1’23, up from 78.1 percent in H1’22.

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