The Fast-Moving Consumer Goods (FMCG) sector in Nigeria is grappling with the repercussions of ongoing exchange rate challenges, with currency depreciation causing foreign exchange losses for major consumer goods companies.
Between June and September, the average exchange rate surged by approximately 20%, rising from an average rate of N634.56/$ in June to N761.33/$ in September. This trend has continued, with the exchange rate climbing even higher, reaching N859.73/$ as of October 19, 2023.
The unification of the exchange rate into a single window on June 14, 2023, significantly impacted the foreign exchange market in Nigeria. The exchange rate saw a substantial increase, rising from an official rate of about N462/$ in 2022 to N765/$ as of June 2023.
This sudden and substantial depreciation of the local currency adversely affected major consumer goods companies in the country. In the first half of 2023, ten leading FMCG companies, including BUA Foods, Dangote Sugar Refinery Plc, NASCON Allied Industries Plc, Unilever Nigeria Plc, Nestle Nigeria Plc, Cadbury Nigeria Plc, PZ Cussons Nigeria Plc, Guinness Nigeria Plc, Nigerian Breweries Plc, and International Breweries Plc, collectively reported foreign exchange losses of about N400 billion, resulting in cumulative pre-tax losses of N246 billion.
With the exception of BUA Foods, Unilever, and Nascon, the remaining companies reported foreign exchange losses. As Q3 results are anticipated, there is a concern that this trend of foreign exchange losses in the consumer goods sector may persist and even worsen.
The significant 20% increase in the exchange rate during the mentioned period underscores the clear and expected impact of these foreign exchange losses on the consumer goods sector in Nigeria. Companies like Nestle Nigeria Plc, Nigerian Breweries, and Dangote Sugar Refinery have been notably affected by these losses, which are likely to continue to impact their financial performance as the Naira continues to depreciate against foreign currencies.
The ongoing challenges related to exchange rate fluctuations are putting pressure on these consumer goods companies, affecting their bottom lines and financial stability.
