Business shutdown: FX losses, rising OpEx threaten real sector’s survival

announced that it is suspending operations in two of its nine breweries.AS FMCG firms become the latest casualty to the country’s worsening business environment, stakeholders are worried about the fate of local industries, fearing that if nothing is done quickly to stem business closure, the future of manufacturing is endangered, TOBI AWODIPE reports.

Last month, the Manufacturers Association of Nigeria revealed that 767 manufacturing companies shut down operations, 335 are distressed, while inventory of unsold finished goods stood at N350 billion. The association also revealed that the sector continued to record a real growth drop and needed urgent intervention to stay alive.

Other companies that recorded FX-related losses in 2023 include, Nestle Nigeria, N173.92 billion; Nigerian Breweries, N153.33 billion; NASCON Allied, N8.54 billion; BUA Cement, N69.95 billion; Lafarge Africa, N 21billion; Guinness Nigeria, N49.1 billion; Dangote Cement, N164.07 billion; BUA Foods, N73.56 billion; Dangote Sugar, N148.33 billion; Okomu Oil, N0.21 billion; Notore Chemical, N5.59 billion; Vitafoam Nigeria, N0.103 billion; Beta Glass, N0.98 billion and Unilever N6.94 billion.

“Prices of goods are also going up every day, the elasticity of demand is high and it is telling on industries like the breweries. It is not easy to transfer costs to consumers because they are also aware that affordability is an issue and when they can no longer absorb the damage on profit margins that is when they increase prices. Margin has now become so eroded that they must look for how to cut costs one way or the other.

While noting that these problems are not peculiar to FMCGs and manufacturers alone, he urged the government to bring down inflation, create more jobs and fix the economy, he said this is the only way to save the sector from imminent collapse. “When people are gainfully employed and resources are available, there will be more disposable income for things. You cannot expect someone who has no job and has not eaten to use whatever resource is available on non-essentials.

“The recent destructive electricity tariff hike could be the final straw for a lot of companies. I am afraid that if nothing is done very soon, many manufacturing plants in Nigeria will eventually shut down. This will result in higher unemployment levels, increased insecurity and lower revenues for the government. Insecurity is at an all-time high, stemming from unemployment and this affects the real sector.

Calling on the Federal Government to help manufacturers access funds easily at lower interest rates, he said a long-term positive change is needed in stabilising the naira. “We need to improve exports, cut down on imports and permanently address the issue of naira depreciation”, he said.Before flagging, please keep in mind that Disqus does not moderate communities. Your username will be shown to the moderator, so you should only flag this comment for one of the reasons listed above.

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