BUSINESS PERFORMANCE 

Supply chain and forex challenges hit Nestlé operations in Nigeria

By our African Marketing Confederation News Team | 2024

Losses for the nine-month period from January-September 2024 increased by 328%. Cost of raw material imports a big factor.  

After-tax losses for the Nigerian operation of the world’s largest food business, Nestlé, increased by 328% for the nine-month period from January–September 2024, according to a recent financial statement issued by the company.

Nestlé global headquarters in Switzerland. Photo: Nestlé

This showed that Nestlé continues “to be at the mercy of a foreign exchange volatility that hurt profit and has left its balance sheet battered for more than a year now”, reports the Premium Times Nigeria newspaper. 

 

Converting Nestlé Nigeria’s foreign currency debt obligation into naira, the country’s base currency, more than doubled to N285.3-billion during the period under review. One naira equals 0,00060 US dollars. 

 

Foreign currency-denominated borrowings constitute more than half of the company’s liabilities in Nigeria. 

 

“The company’s dollar obligations leapt in naira terms during the period as monetary authorities in Nigeria executed a one-off devaluation of the local currency in January, while a limited supply of the greenback further weakened the naira,” Premium Times Nigeria says. 

 

Revenue climbs despite weak economy 

 

Despite the weak local economy, Nestlé Nigeria’s revenue for the period climbed 67.8% to N685.3 billion in the period under review. 

 

However, cost of sales increased due to a significant rise in import costs of the raw materials required for business operations in the country. 

 

According to news agency Reuters, the company is working to reduce its supply chain exposure by sourcing alternative raw materials such as cassava starch to replace imported corn starch. It is also now sourcing turmeric locally. 

 

“Nestlé’s big issue is the fx-denominated loans, whose costs have soared due to the devaluation of the naira. Furthermore, fx (foreign exchange) losses have risen by 124%,” comments Trendtype, the emerging markets consultancy. 

 

Last month, the World Bank said Nigeria’s struggling economy is beginning to show positive results from the economic reforms being implemented by President Bola Tinubu. 

 

This provides a glimmer of positivity for the country’s consumers and business community, beset by a range of issues including high inflation, lack of market confidence, reduced spending on FMCG goods, and a shortage of foreign exchange.  

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    Dr Kin Kariisa

    Group CEO - Next Media

    Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
    With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
    Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.

    Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.

    Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.

    • Other current and previous roles played by Dr Kin Kariisa:
    • Lecturer of e-Government and Information Security to graduate students at Makerere University, Kampala and Radbond University in the Netherlands
    • Director of Eco Bank Uganda Limited, one of the largest banks in Africa
    • Chairman of the National Association of Broadcasters, an umbrella industry association for all Television, Radio and online broadcasters in Uganda.
    • Chairman of Board of Directors of Nile Hotel International, that owns the leading hotel in Uganda, Kampala Serena Hotel.
    • Chairman of Board of Directors of Soliton Telmec Uganda, the leading telecom company in Optic fibre business managing over 80% of optic fibre in Uganda.