Guinness Nigeria gets lifeline loan to bridge FX shortages

Guinness Nigeria Plc, said on Wednesday that it had received a $95m loan from parent company Diageo to help bridge dollar shortages caused by a decline in crude oil prices.

The company’s chief financial officer, Ronald Plumridge disclosed this during an analyst call. He said the company’s dollar needs were far much bigger than they could source locally or through exports, so Diageo stepped in with the loan.

According to the CFO, the loan was priced at 3-month Libor plus 4.75%, he said.

Nigeria is in the grip of one of the worst recessions in decades as crude oil prices plummet, causing severe shortages of foreign exchange and dwindling government revenue.

In June, the Central Bank of Nigeria moved to a floating exchange rate system to stem the naira decline and stabilize the foreign exchange market. Instead the naira devalued by as much as 40%, spiking inflation and severe FX shortages.

“Longer term, we intend to source raw materials locally,” Plumridge said. “The mix of the business, FX impact, and inflation put pressure on the growth.”

Guinness Nigeria audited financial results for the full-year released on Tuesday showed a net loss of N2bn, the first time in 30 years.

The brewer said it would cut total dividend to 0.50 naira for 2016, from N3.20 a year ago and reduce staffing levels by 310 in the last quarter of the year, Plumridge said.

Guinness plans to start producing spirits locally half-way through 2017, to reduce costs and get back to profitability, the company said.

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