Manufacturers’ N266 Billion Loss in 2023: High Costs Amid Inflation, Exchange Rate Volatility


Manufacturers of consumer goods in Nigeria are grappling with significant losses totaling N266 billion in 2023, a sharp decline from the N320.5 billion profit recorded in 2022. This downturn is primarily attributed to the soaring costs of raw materials driven by inflation and exchange rate fluctuations. Despite recent positive trends in exchange rates, the impact of these challenges is expected to keep consumer goods prices elevated in the coming months.

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Financial Vanguard’s investigation reveals a staggering 25.5% rise in the cost of raw materials for manufacturers in 2023. Even current stocks of raw materials procured through the first quarter of 2024 were acquired at higher costs, exacerbating the financial strain on companies.

The adverse effects on profitability have led manufacturers to implement strategies aimed at recovering losses through inflation-driven price mark-ups in 2024. With headline inflation soaring to 33.2% by the end of the first quarter of 2024, and the exchange rate averaging N1500/$1, manufacturers face unprecedented challenges in sustaining profitability.

Key players in the Fast Moving Consumer Goods (FMCG) sector, including Unilever Nigeria Plc, Nestle Nigeria Plc, and Dangote Sugar Refinery Plc, reported substantial increases in raw material procurement costs. This surge in costs, coupled with the revaluation of dollar-denominated loans, resulted in a combined loss before tax of N266.51 billion for the companies, contrasting sharply with the previous year’s profits.

Managing directors of affected companies, such as Nigerian Breweries (NB) Plc and BUA Foods Plc, attributed the cost escalation to exchange rate volatility and inflationary pressures. They warned consumers to brace for further price hikes as a direct consequence of currency devaluation and inflationary trends.

In response to the persistent rise in raw material costs, companies are prioritizing localization initiatives to mitigate supply chain risks. Nigerian Breweries Plc, for instance, is expanding its sorghum cultivation areas, while Unilever Nigeria Plc aims to increase its locally sourced agricultural materials to over 50%.

Despite efforts to enhance local sourcing, financial analyst Mr. David Adonri highlights ongoing challenges, including insecurity hindering domestic raw material procurement. He emphasizes the detrimental impact of cost-push inflation on manufacturers’ profitability and the broader economy, urging concerted efforts to address these systemic challenges.

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