Fast Moving Consumable Goods (FMCG) firms in Nigeria intend to increase product prices after devaluation of the naira, epileptic power supply, dollar shortage and rising inflation resulted in substantially higher operating costs.
Most consumer goods firms have been complaining that the shortage of the dollar made it difficult for them to import raw materials required production would undermine profit margins and erode shareholder’s value.
“Most companies said they intend to increase product prices by 10-20% in 2H16 to offset the impact of naira devaluation on imported CoGS and higher inflation,” said Seki Mutukwa, Frontier Markets Analyst, on Nigerian consumers at Renaissance Capital Limited.
“They have not seen an improvement in FX availability in the interbank market since the devaluation in June 2016, which has resulted in capex deferral and rising FX-related trade payables,” said Mutukwa.
The cumulative cost of sales of 11 companies in the beverages and consumer goods industry will rise by about 52.23 percent to N1.18 trillion in December 2016 from N775.13 billion recorded last year, according to Nairametrics projections.
This is three times inflation figure of 17.10 percent for the month of July. Nigeria has seen the price of oil, which account for 70 percent of government revenue and nearly of its foreign exchange earnings drop by 50 percent since mid 2014.