Emmanuel OchayiCardinal Stone’s latest report, ‘Strategic Resilience: Sailing Through Business Disruptions,’ highlights the looming possibility of multinational firms exiting Nigeria’s Fast Moving Consumer Goods sector this year if the challenging operating environment persists.
The report emphasizes the enduring high operating costs faced by FMCG companies and suggests potential strategies for resilience.
According to the report, the FMCG sector is grappling with continued exposure to fluctuations in commodity prices, exchange rates, import duties, and freight costs.
READ ALSO: GSK, JSM Exit Will Further Squeeze Nigeria’s Health Sector – Obi
The depreciation of the naira, dropping from N422.00/$ in June 2023 to N951.94/$ in December 2023 after the Central Bank of Nigeria’s exchange rate floatation, poses a hurdle for FMCGs to benefit from global commodity price moderation.
“In 2024, we expect companies to continue to re-imagine their operational strategies to achieve cost efficiency,” the report states, pointing to the need for collaboration among FMCGs to enhance economies of scale, diversify product portfolios, and harness technological innovations.
READ ALSO: Why Cement Prices Will Remain High In 2024 – Report
The report warns that if left unaddressed, challenges such as a weaker currency spiking diesel costs and the lingering impact of higher energy costs could push multinational companies toward exits or high-cost segments, akin to previous cases involving Procter and Gamble, GSK, Pernord Ricord, and Unilever.
Additionally, the report anticipates potential challenges in borrowings due to the combined impact of dollar-denominated debts and the surge in naira values of operating and machinery costs, potentially leading to increased effective interest rates.
The outcome, it suggests, is contingent on whether there is a shock in naira appreciation.
Follow Us