Consumer Goods Companies report reduced margins in the first half of 2024, blame higher production 

In the first half of 2024, consumer goods companies listed on the Nigerian Stock Exchange (NGX) reported a significant surge in production costs, averaging a 67% increase compared to the same period in 2023.

The combined operational costs of eight major companies reached N1.58 trillion, up from N952.32 billion the previous year.

Factors such as exchange rate pressures, rising energy costs, and logistics challenges have been identified as the primary drivers of this cost increase.

Cadbury, Nestle, and Nigerian Breweries were among the companies most affected, with some seeing their production costs nearly double.

For example, Nigerian Breweries’ costs soared from N165.09 billion to N320.08 billion, while Dangote Sugar’s costs rose by 92% to N277.49 billion.

The sharp rise in production costs has significantly impacted profitability, with five of the eight companies reporting after-tax losses.

For instance, Nigerian Breweries saw its losses nearly double from N47.55 billion in 2023 to N85.19 billion in 2024.

International Breweries and Dangote Sugar also experienced substantial losses, with Dangote Sugar’s losses skyrocketing by over 400% to N144 billion.

The Chairman of the committee of Finance experts at the Nigeria Employers’ Consultative Association (NECA), Olumuyiwa Adebayo, attributed the spike in costs to factors like the naira’s depreciation, global oil price fluctuations, and the removal of Nigeria’s petrol subsidy.

He suggested local sourcing of raw materials and improving energy efficiency as potential mitigation strategies.

As production costs continue to rise, companies have passed these costs onto consumers, contributing to inflation levels that have reached a near 30-year high.

According to a Nielsen IQ report, around 70% of Nigerian consumers have switched brands due to rising prices, with transaction volumes in the FMCG sector declining by almost 20% in the first quarter of 2024.