Why did the FMCGs take these steps ?
A drop in crude oil income and production volumes precipitated a foreign exchange crisis in the country and pushed the economy into recession. While the economy has since recovered, growth remains weak.
For FMCGs in the country, the devaluation of the Naira and foreign exchange liquidity crisis witnessed in the first half of 2017 hit them in two ways. Raw materials became more expensive and they were unable to pass the increase to their customers, who were had hit by either a drop in income or many cases lost their jobs. Operating costs thus became more expensive and revenues dropped.
How did the FMCGs surmount this ?
Several of the firms had to obtain foreign exchange loans from their parent company, which they repaid from the proceeds of rights issues raised in Naira. They also increased the local content used in their products.
Industries producing indigenous raw materials will witness increased patronage. This in turn leads to increased employment. Distributors for the FMCG will also have faster turnove. The companies also retain their market share, as smaller competitors often specialize in retail packages.
For the average Nigerian whose purchasing power has declined due to inflation and a drop in earnings, cheaper retail packages mean they are able to maintain the same standard of living.
Unilver closed at N46 in today’s trading session on the Nigerian Stock Exchange. Nestle Nigeria Plc (NESTLE:NL) closed at N1475 in today’s trading session. PZ Cusson closed at N23.79 in today’s trading session.