Naira weakness spurs Unilever, Cadbury, Guinness to boost exports

By Mary Adenike

Several multinationals operating in the Nigerian fast-moving consumer goods sector increased their exports to other African countries last year to curb the impact of the country’s currency weakness on their financials.

Markets Reporters analysis of the latest unaudited financial statements of Unilever Nigeria, Cadbury Nigeria and Guinness Nigeria shows that their combined export sales surged to N22.8 billion from N9.92 billion in 2023.  Their total revenue jumped to N538.6 billion from N253.6 billion. The half-year financials of Guinness were used as its fiscal year runs from July to June.

The naira lost more than 70 percent of its value against the dollar following two sharp devaluations since July 2023, making Nigerian goods and services cheaper for foreign buyers, according to experts.

This has pushed some manufacturers to devise ways to leverage the export opportunity as it helps them get more naira to source for more foreign exchange needed for production.

“The rise in exports is one of the major positives from the federal government reforms, especially the FX reform. Quite a number of companies are doing exports now, and even those that were traditionally not into it are now diversifying into that area to source foreign exchange,” Muda Yusuf, CEO at Centre for the Promotion of Private Enterprise, said.

He added that the returns on investments are higher when firms export and that the environment is right for exports, especially if the import content is not high. “The backward integration that they are doing is also making exports more profitable than before, in addition to the depreciation in the currency.”

The manufacturing sector’s local raw material sourcing rose to a four-year high of 56.03 percent in the first half of 2024 from 55.4 percent a year earlier, according to the available data from the Manufacturers Association of Nigeria (MAN).

“This modest increase indicates a gradual shift towards local sourcing, driven by difficulties in obtaining foreign exchange,” MAN said in its latest half-yearly report.

Unilever’s after-tax profit grew to N15.9 billion from N8.4 billion, while Cadbury and Guinness saw their losses narrowed to N10.7 billion from N24.3 billion.

Data from the National Bureau of Statistics shows that Nigeria’s trade with other African nations surged to N1.12 trillion in the first nine months of last year from N518.7 billion in the same period of 2023.

The biggest boost to non-oil exports has not been any deliberate policy targeting it, but the rapid devaluation in the naira that has boosted competitiveness relative to our West African neighbours, according to a recent report by Agora Policy, a Nigerian think tank.

“Using Côte d’Ivoire as a proxy, Naira’s real exchange rate, a much better measure of competitiveness than nominal exchange rates, depreciated by 42 percent between May and December 2023 compared to a 78 percent appreciation from May 2017 to May 2023,” it said.

While the Nigerian currency has depreciated, the West African CFA franc, a legal tender in Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo, has appreciated, fuelling the demand for Nigeria-made products.

At the official market, the naira depreciated from 463.38/$ on June 9, 2023, to N1,522.68/$ as of January 28, 2025. The naira has also weakened against the West African CFA franc, falling from 0.76 per CFA1 to 2.42 per CFA1 in the same period.

In a bid to leverage the high demand, some manufacturers set up shop in some of the countries.

 “To make it easy to export to some countries, we needed to open up depots as subsidiaries to enable the easy flow of goods and distribution into some countries; especially the smaller countries,” Paul Odunaiya, managing director/chief executive officer at Wemy Industries Limited, said.

Uchenna Uzo, professor of marketing and faculty director at Lagos Business School, said relationship building with other African countries is very key to exports.

“So, the manufacturers have widened their networks beyond Nigeria and can know the right time and place to bring in a product within Africa,” he said.

The Export Expansion Grant (EEG), a major incentive scheme for exporters in Nigeria, has been marred with allegations of corruption against some government officials and a lack of due diligence by the Nigerian Export Promotion Council before sending the list for approval.

These bottlenecks have made many exporters lose trust in the scheme as they fault the possibility of receiving the grant when required.

Obiora Madu, director-general of the African Centre for Supply Chain, noted that the country is neither strategic nor intentional towards exports.

“The EEG is working with one leg and the export development fund that was supposed to help people to export and take them to the international market never worked,” he said. “Look at Australia, they have a basket of incentives for exports. It is one of the countries that knows that if they don’t export, they are finished.”

The Federal Government in December 2023 launched the Trade Policy of Nigeria (2023-2027). The policy focuses on accelerating pro-poor growth through the pursuit of market-oriented policies, based on principles that are consistent with Nigeria’s rights and obligations in World Trade Organisation thereby ensuring a fair and equitable platform for catalysing the country’s participation in global trade.

It aligned with the Medium-Term National Development Plan 2021-2025 as well as the Agenda 2050.

The Agora report recommended that competitive advantages created by the exchange rate depreciation must not be ignored but nurtured. This means the central bank must equally prioritise policies that will enable Nigerian businesses to compete better in global trade, it said.

“Indeed, investment-led growth strategies, which we have recently seen in many African countries such as Nigeria, Egypt, and Ethiopia, also have constraints. Investment in infrastructure funded by foreign currency debt, which produces no export earnings, is largely responsible for much of the continent’s current currency crisis,” it added.

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