Nigeria’s forex crisis hurts importers and local producers
Peter Ndegwa Chief executive, Guinness Nigeria
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