Local inputs are used by manufacturers to reduce FX pressure.
To lessen their vulnerability to foreign currencies, Nigerian firms are using indigenous raw materials more and more.
Nigeria has experienced its greatest foreign exchange crisis in nine years due to a comparatively low supply and a very high dollar demand.
Since they import some of their raw materials, such as chemical gums and hot-rolled steel, the country’s businesses have been negatively impacted.
Following the foreign exchange float in 2023, the value of the naira has dropped by more than 70%, yet this has even prompted producers to look for more locally produced raw materials.
One excellent example is FrieslandCampina WAMCO. It sources raw milk, a necessary component for its products, from over 20,000 pastoralists in Oyo, Osun, Ogun, Ondo, and Kwara, as well as the northern regions.
Five million liters of milk are sourced from nearby pastoralists. Today, some of its products are made entirely of locally produced milk that is purchased straight from farms.
As part of our dairy development sites, we provide these farmers with training and assistance so they can plant trees in their local communities. In 2023, the business stated, “We also assist them with pasture development.”
In a same vein, Nigerian Breweries reported that it spent N78 billion over five years cultivating cassava and sorghum. Beer is made using cassava and sorghum as ingredients.
During the company’s 2023 pre-Annual General Meeting media briefing last year, managing director Hans Essaadi stated that the largest brewer would keep funding the advancement, enhancement, and marketing of its agricultural raw materials.
“Nigerian Breweries has also continuously expanded its sorghum sourcing areas to new communities to increase the positive impact of local sourcing of its agricultural raw materials,” he said, adding that the company was collaborating with research institutes to produce higher yield varieties in northern Nigeria.
Although the focus has turned to the Dangote Petroleum Refinery, Africa’s richest man, Aliko Dangote, owns a cement mill that uses locally sourced silica, gypsum, limestone, and clay.
Lafarge Africa, BUA Cement, and Dangote Cement all procure their materials locally from a variety of locations all around the country.
Additionally, in June 2023, Nestle announced that it was attempting to establish local suppliers of turmeric powder in Nigeria and onion powder in Senegal.
“We have effectively boosted local farmers and processors in the grain sector. Reuters reported that Nestle stated, “This has been accomplished through (a lot of) training in good agricultural practices, harvesting, warehousing, and cleaning practices.”
“As part of our commitment to sustainability, we are now moving forward with introducing these farmers to regenerative agriculture.”
Even though PZ Cussons just announced that it will be leaving, its 2010 joint venture with Wilmar has proven to be successful.
In Cross River State, PZ Wilmar holds 26,500 hectares of palm oil plants. Calaro Estate contains roughly 5,549 hectares (ha) of oil palm plantations, whereas Calaro Extension comprises 2,369 ha. PZ and other manufacturers purchase their palm oil from Wilmar as a result.
PZ Wilmar contributed £10.7 million (FY2) to PZ Cussons’ adjusted operating profit of £30.3 million in the fiscal year that concluded on May 31, 2024. Compared to Wilmar’s £7.5 million contribution the year before, this was an improvement.
This improvement is a result of ongoing superior commercial execution as compared to the previous year.
The percentage of local raw materials sourced by the manufacturing sector rose from 48 percent in the first half (H1) of 2022 to 55.3 percent in the first half of 2023.according to the Manufacturers Association of Nigeria (MAN), and 53.5% in the second half of 2022.
Local sourcing of raw materials is more prominent in the agro-allied sector, where manufacturers seek out more cassava, starch, milk, and animal skins for processing, according to farmer and businessman Ifeanyi Okeleke.
The cost of raw materials is increasing despite businesses’ efforts at backward integration.
Because some of the inputs are still being imported, this is the case. Additionally, the high cost of electricity, growing logistics expenses, and input shortages are driving up the cost of beneficiating or processing raw materials.
Compared to N576.5 billion in the same period in 2023, the raw material costs of BUA Foods Plc, Nigerian Breweries Plc, Dangote Sugar Refinery Plc, Nestle Nigeria Plc, BUA Cement Plc, Nascon Allied Industries Plc, and Champion Breweries Plc increased by 121% to N1.27 trillion in H1 2024
Join Our Social Media Channels:
WhatsApp: NaijaEyes
Facebook: NaijaEyes
Twitter: NaijaEyes
Instagram: NaijaEyes
TikTok: NaijaEyes
