Nestle Nigeria Plc said on Wednesday that a shortage of foreign exchange in the country was hampering business operations and ability to import equipment.
While speaking at an event organized by the Nigerian Stock Exchange and Bloomberg in Lagos, Mr. Dharnesh Gordhon, Chief Executive Officer of Nestle Nigeria, said:
“It continues to be a major challenge. Imports of machine parts and some packaging have become more expensive, and even local suppliers are putting up their prices to compensate for a weakening naira,” he said.
Manufacturers are struggling under the weight of a severe shortage of hard currency in the last two years as oil prices and foreign investment plummet. They say they need access to foreign exchange to pay for import of raw materials and parts. A move by the central Bank of Nigeria in June to a flexible exchange system and the subsequent devaluation of the currency that followed by as much as 40% has not eased scarcity of foreign exchange.
The scarcity is a “big issue for everyone,” Segun Ogunsanya, head of Airtel Nigeria, said at the event. It’s “impacted us significantly in the way we invest in new technologies,” he said.
Manufacturers are also faced with a weakening economy as GDP growth fell 2.1% year-on-year in the second quarter, the National Bureau of Statistics (NBS) reported on Wednesday. This was on the heels of a 0.4% decline in the first quarter of the year. The International Monetary fund is forecasting the Nigerian economy will shrink by 1.8% this year for the first time since 1991.
“People cannot afford anymore protein,” Gordhon said. “The amount of protein they are adding to their meal on a daily basis is becoming less because they just don’t have the money. They are looking for ways to make that meal tastier and it’s up to nestle to come up with ways for consumers to achieve that,” he said.
Power cuts are adding to manufacturer’s woes as gas supplies to electricity plants are reduced, partly because of militant attacks on pipelines in the south of the country, Gordhon said.
“The challenge is how do you satisfy demand when you have supply challenges,” Gordhon said. “Supply challenges mean no gas, infrastructure challenges, crime increasing, no foreign exchange.”