Across the globe, many consumer groups on the front line of the cost of living crisis have promised shoppers that the steady price increases of the past few years will thin out as global inflation cools.
However, for consumers in Nigeria, there is little to no relief in the foreseeable future.
Nigerian Breweries, a brand partly-owned by Heineken, has hiked its prices three times so far in 2024.
The economic distress in Africa’s most populous nation is so dire that the brewer’s chief executive, Hans Essaadi, lamented during an investor call that customers could no longer afford to buy Goldberg, a cheap and well-loved lager beer.
The ever-increasing prices are an indicator of an economic malaise in the country that appears to have no end.
A long-running scarcity of foreign exchange and a sharp devaluation of the Naira has posed a significant challenge for multinationals.
A lot of them have fixed costs, for their raw materials, invoiced in dollars that they must now buy it using a slumping currency — and then they find it almost impossible to repatriate any earnings. This is as the Nigerian central bank declared in March ending that it had cleared all “valid” foreign exchange obligations.
A few of the world’s biggest consumer groups, had in response to the economic situation, headed for the exit, giving up on a market where headline inflation, which stood at 31.7 per cent in February, has wiped consumer spending power.
Unilever quit producing home-care and skin-cleansing products, a key product of its Nigeria sales, a year ago. The CEO, Hein Schumacher cited the impact of the foreign exchange crisis and remarked that the group was “not able to fight the market at competitive prices”.
GSK’s Nigeria affiliate had also cut back on its operations last year, putting a stop to its own drug distribution and turning to third-party Nigerian companies.
Germany owned Bayer and French giant, Sanofi, which produces polio vaccines, have followed suit since then.
The deepest cut has come from American group Procter & Gamble, which in December announced that it would stop in-country production and switch to importing into the west African nation.
South African telecommunication company MTN, which gets a third of its earnings from Nigeria, suffered a set back of an almost 80 per cent drop in annual profits in 2023.
The weakening Naira caused its Nigeria’s operations to lose N133.8bn ($97mn) .
PZ Cussons’ chief executive, Jonathan Myers had described the devaluation of the Naira as the company’s “most relevant challenge”.
Nigeria is PZ Cussons’ biggest single market. The Manchester-based company cut profit expectations after group revenue fell almost 18 per cent for the six months to December 2 while pre-tax profits fell about a quarter to £26.1mn.
The situation is not so bleak tho, several non-western consumer brands see an opportunity to provide Nigerians with inexpensive alternatives as their bigger rivals pull back.
Olam, a Singaporean company is one of those still investing in Nigeria. The company, which runs an agri-processing business and makes its products such as biscuits and noodles, launched a new pasta brand in 2023 and is presently building a soya crushing facility in western Nigeria— an enterprise expected to be completed later in the year.
Anil Nair, Olam’s Nigerian head of operations, had said that although the business had been affected by the economic headwinds, the company remained strong because “Nigeria’s large and growing population presents significant opportunities for food and agricultural businesses”.
Nair said the group had a “localised strategy” which meant it sourced its raw materials and produces in the country, allowing it to minimise dependency on imports and foreign exchange fluctuations.
Meanwhile, Nigeria Breweries posted its first annual net loss in over a decade last year, and The Manufacturers Association of Nigeria, — MAN, had warned that while multinationals are fighting to weather the crises, smaller local businesses in the country are being mandated to close up shop altogether.
Segun Ajayi-Kadir, MAN’s director-general, had said recently that many businesses had “died quietly” and warned that “if the current situation didn’t improve, certainly we’ll see more closures”.
