Nige­ria’s forex cri­sis hurts im­porters and lo­cal pro­duc­ers

Peter Ndegwa Chief ex­ec­u­tive, Guin­ness Nige­ria

The Africa Report - - BUSINESS TOP 500 COMPANIES -

TAR: How has the naira af­fected your op­er­a­tions, fi­nan­cial plan­ning and sup­ply chains?

The naira has neg­a­tively af­fected our op­er­a­tions be­cause we im­port 30% of the ma­te­ri­als that we use for our prod­ucts. Even when we buy lo­cally, a large chunk of in­puts that lo­cal sup­pli­ers use are also im­ported. So, both ways, we pay a higher price. We pay a higher price be­cause of fluc­tu­at­ing forex rates. With liq­uid­ity pos­ing a big chal­lenge, com­pa­nies now opt to buy forex from the par­al­lel mar­ket. And that makes us buy im­ported goods at the par­al­lel rate in­stead of the of­fi­cial, thereby putting the in­fla­tion at be­tween 30% and 50% de­pend­ing on the kind of raw ma­te­ri­als that are re­quired at ev­ery point in time. As a re­sult of that, man­u­fac­tur­ers – es­pe­cially those with for­eign ma­jor­ity share­hold­ers – have had to get the higher rate forex so as to en­sure that op­er­a­tions are not af­fected. This is the pre­vail­ing sit­u­a­tion mak­ing com­pa­nies, in­clud­ing Guin­ness, re­port losses on the pure ba­sis of forex. In the first quar­ter of this year for ex­am­ple, Guin­ness had a N4bn ($12.7m) im­pact due to forex.

So what per­cent­age of your prod­uct is pro­duced lo­cally?

Eigh­teen months ago, it was at ap­prox­i­mately 49%. By the end of June 2016, it had risen to 70% […]. In nav­i­gat­ing through this pe­riod, we kind of re­alised that al­though our in­tent in the long term is to source 75% of our in­puts lo­cally, the next 12 to 18 months may not be as straight­for­ward as we thought be­cause prices of lo­cal raw ma­te­ri­als may spi­ral, thus mak­ing it more ex­pen­sive than the im­ported equiv­a­lent be­cause of high ex­change rates. So, in the long term, it’s best to source lo­cally.

How do you track the emer­gence of new po­ten­tial cus­tomers? We’ve been in Nige­ria for 66 years. So be­cause of that length of time, we have gath­ered a lot in­for­ma­tion on var­i­ous parts of Nige­ria through en­gag­ing the ser­vices of re­search agen­cies that help us to have an un­der­stand­ing of what con­sumers want. Through the in­for­ma­tion gath­ered, we are able to pro­duce a wide va­ri­ety

“Though our long-term in­tent is to source 75% of our in­puts lo­cally, prices of lo­cal raw ma­te­ri­als may spi­ral”

of brands rang­ing from beer, adult pre­mium non-alcoholic drinks to spir­its. Our un­der­stand­ing of con­sumer needs is part of what makes us a lead­ing com­pany from an in­no­va­tion per­spec­tive. And over the past two years, we’ve prob­a­bly launched close to half a dozen prod­ucts, some of which have been very suc­cess­ful. In­ter­view by Onome Amawhe in La­gos

Newspapers in English

Newspapers from Botswana

© PressReader. All rights reserved.