One of Nigeria’s largest millers, Flour Mills Nigeria Plc, said Nigeria’s currency devaluation would hurt its profit margins, even as it may not be able to pass the rising costs to consumers.
This was disclosed by the Company’s Group Managing Director, Paul Gbededo, during an interview with Bloomberg.
He disclosed that Flour Mills has taken half the risks of naira’s devaluation, which weakened by 25% in Q1 2020. Flour Mills has only adjusted its prices by 12%.
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Speaking further, Gbedebo disclosed that Flour Mills sources 25% of its raw materials locally and now plans to increase local sourcing by 40% come 2024, in view of the Forex constraints.
Note that the company began to source it’s raw materials locally during the 2016 currency crisis in Nigeria.
The plan to increase local sourcing of raw materials is expected to help the company to reduce the costs of maize per ton, following the CBN’s announcement in July that it would stop issuing FX to maize importers at the official rate.
Mr. Gbededo, however, noted that despite CBN’s aggressive forex policies, Nigeria still does not have the capacity to meet its local maize demand.
READ: Nigeria’s worsening current account deficit piles pressure on exchange rate
Moving on, the CEO revealed that the company is working to change its debt structure by focusing on a more long term debt than short term debt.
Nairametrics reported that Flour Mills of Nigeria Plc had concluded plans to issue a bond within the next 2 months, as part of a N70 billion ($184 million) programme to refinance existing debt.
