Dollar Shortage Is Sales Boon For Flour Mills Nigeria
The dollar shortage hurting firms in Nigeria is ironically a boon for Flour Mills Nigeria plc. Sales in the country’s largest miller has gotten a major boost, thanks to increased patronage from buyers starved of the USD.
Flour Mills, Nigeria’s largest miller by market value said the current economic fundamentals is forcing firms to source materials locally and that bolstered top lines.
For the six months through September 2016, Flour Mills’ sales jumped 44 percent to N255 billion. Profit after tax dropped to N6.5 billion from N24 billion due to foreign exchange losses, the company said in an October filing on the website of the NSE.
Nigeria’s external reserves dwindled after a sharp fall in oil price that stoked a severe currency shortage.
The central bank pegged the Naira at N197-N199 for 16 months while imposing capital controls by banning importers of 41 items, including palm-oil and rice, from accessing official foreign-exchange markets in June 2015.
While the Apex bank introduced a flexible exchange rate in June this year that saw the Naira lose 40 percent of its value against the dollar (depending on what exchange rate you are using), manufacturers still bemoan dollar shortage.
The aforementioned policies hasn’t assuage the pains of business instead it has plunged the country on its worst recession in 25 years.
Nigeria’s economy contracted by 2.2 percent in the third quarter of the year, according to a recent report by the NBS. IMF forecasts GDP will shrink by 1.7 percent by 2016.
According to Flour Mills, fifteen months ago, one ton of corn was sold for N60,000 ($190). Today it is N125,000.
The above statement means inflation which is already at 11 months high in October will spiral up in subsequent months, according to an analyst who spoke with Nairametrics and who doesn’t want his name mentioned.
The shares have declined 11 percent this year, compared with a 7.3 percent fall on the Nigerian Stock Exchange Main-Board Index. That values the company at N49 billion.