The Flour Mills of Nigeria Plc. has explained why it had no choice but to increase the prices of its products. John Coumantaros said this while speaking with investors at a meeting in the commercial hub, Lagos.
Coumantaros listed a fall in crude prices, a weak naira and rising input costs as 3 major reasons the company had no choice but to raise the prices of their product, if the company was to “offset the impact” of the challenges, Bloomberg reports.
The fall in crude oil prices has caused a budget deficit and necessitated the pegging of the Naira to the dollar. This, unfortunately led to the scarcity of forex, and a simultaneous increase in prices of inputs of industries, such as its own.
Even though the peg had been removed and the Naira devalued for almost 3 months, foreign investors are still reluctant in pouring in their forex into the economy, which is creating problems for industries that import their inputs such as Flour Mills of Nigeria.
“The aspiration is that once you devalue, the people will bring in their dollars; that, we are not seeing yet… Nigeria is badly hit with foreign-exchange earnings, thereby not being able to fulfill its import bill.” Paul Gbededo, Flour Mills managing director, said in a separate interview with Bloomberg.
He stated further that “For [industries] who are import-dependent, you have to see an increase in price, …,” justifying the ‘commensurate increases’ in the selling prices of its products.
As if to compound problems, Coumantaros listed another 3 problems of bad road networks, inadequate power supply and worsening security, which all make it difficult for the company to achieve the expected results.
To reduce the dependence on imports, though, the company has invested in sugar cane production and a sugar mill, while looking for ways of sourcing other raw materials locally, which may lead to stable pricing, if successful.
Parts of this article originally appeared in Bloomberg News.
