•GDP growth, 50,000 employees may be impacted
Partner at Kreston Pedabo, Kehinde Folorunsho, has attributed the staggering N818.3 billion combined loss reported by key players in Nigeria’s Fast-Moving Consumer Goods (FMCG) sector to unfavorable government policies.
In their 2024 half-year financial statements, major companies such as Nestlé Nigeria Plc, Dangote Sugar, International Breweries, Cadbury, Champion Breweries, Guinness Nigeria, and Nigerian Breweries revealed a collective loss before tax, raising concerns about the health of the FMCG sector and the wider implications for the Nigerian economy.
Folorunsho noted that the FMCG sector plays a vital role in Nigeria’s economy, offering essential goods like food, beverages, and household items, adding that the significance of the sector goes beyond meeting everyday needs.
According to him, a decline in the FMCG sector could have profound consequences for economic growth, employment, and consumer spending.
Folorunsho stressed that recent government policies, such as the full deregulation of the petroleum industry and the harmonisation of foreign exchange rates, have placed immense pressure on the FMCG sector.
“These policies have driven up production costs, increased inflation, and caused a significant reduction in profit margins. The combined N818.3 billion loss is a direct consequence of these unfavorable conditions,” he said.
The partner at Kreston Pedabo warned that if these losses persist, the consequences for the Nigerian economy could be severe.
Folorunsho worried that the FMCG sector is a major contributor to Nigeria’s GDP, and continued losses could lead to job cuts, potentially affecting over 50,000 employees. He noted that millions of Nigerians depend on the sector for their livelihoods, as such the impact could be far-reaching, including reduced government revenue from the sector which may affect infrastructure development and essential services, which are critical to the country’s growth.
He also pointed out that such heavy losses may deter potential investors. “This loss could scare away investors and prevent FMCG companies from accessing much-needed capital, which is essential for their long-term sustainability and growth,” he said.
Looking ahead, Folorunsho expressed cautious optimism about the second half of 2024, adding that many FMCG companies are already implementing measures to mitigate their losses. “FMCG companies have been adopting cost-cutting measures, restructuring their debts, and expanding their operational capacity. These strategies should start yielding positive results in the second half,” he said.
Folorunsho also mentioned promising developments, such as the commencement of production at the Dangote refinery and improvements in electricity supply. However, he cautioned that challenges like high operating costs and foreign exchange volatility would continue to weigh on the sector.(Guardian)
