Abstract
The Fast-Moving Consumer Goods (FMCG) sector in Nigeria suffered setbacks in 2024 due to economic shifts driven by inconsistent Government policies. Several multinational companies like Kimberly-Clark Nigeria, Pick n Pay, and many others exited Nigeria because of these changes, particularly after the free float of the exchange rate and the removal of the fuel subsidy. This led to increased inflation and depreciation of the Naira, prompting intervention from the Central Bank of Nigeria (CBN) to manage the crisis through aggressive monetary policies. Despite the challenges, Nigerian-founded businesses stepped in to fill the void, either by acquiring the businesses of exiting multinationals or creating alternatives. From a regulatory perspective, 2024 witnessed increased regulatory and supervisory activities by regulatory agencies like the Federal Competition and Consumer Protection Commission (FCCPC) that took steps to address issues of overinflation of prices by businesses during the pick of the inflationary periods. The Nigerian Customs Service (NCS) increased the customs exchange rate, which further escalated importation costs. However, with the introduction of the Foreign Exchange Matching System by the CBN and the commencement of oil refining at local refineries, promises of future growth in the sector is in sight. This also extends to the ongoing rise in population and consumer demand, combined with expected reductions in inflation, which suggests a positive outlook for Nigeria's FMCG sector in 2025.
Introduction
The FMCG sector in Nigeria is a vital component of the nation's economy, serving as one of the largest contributors to labour employment, industrial growth, and consumer spending. However, the sector faced significant hurdles in 2024, driven by economic policy shifts and the broader global economic trends. This Forecast explores the effects of these challenges on the FMCG sector and how the industry is navigating through a rapidly changing economic landscape. It also discusses the role of multinationals, local businesses, regulatory agencies, and Government policies in determining the sector's trajectory for 2025.
Economic Challenges in 2024
Impact of Exchange Rate Adjustments and Fuel Subsidy Removal
The introduction of the free float of the exchange rate in 2024 marked a significant turning point for Nigeria's economy. This policy shift, coupled with the removal of the fuel subsidy, caused a steep rise in inflation and the depreciation of the Naira. With the cost of importing goods skyrocketing, the FMCG sector experienced an immediate negative impact, especially those relying heavily on imported raw materials and products. As the Naira lost value against the US Dollar, businesses found themselves struggling to maintain margins, passing on the increased costs to consumers. According to reports by Nielsen IQ in March 2024, a 17.4% decline in the volume of transactions occurred, due to the high cost of goods. For the major consumer goods companies, the average cost of production rose by 67% in the first half of 2024 compared to the first half of 2023. However, despite these challenging market conditions, the FMCG market value grew, increasing by 21.6% in 2023 and further accelerating to 24.8% in 2024.
Economic Challenges in 2024
Exit of Multinational Corporations
As a result of these unfavorable macroeconomic conditions, several multinational corporations made the difficult decision to exit Nigeria's market either by scaling down its operations, transferring ownership or selling their stakes completely. Companies like Kimberly-Clark Nigeria exited Nigeria in June, Pick n Pay exited Nigeria in October and sold its 51% stake in a Joint Venture with A.G Leventis, Diageo sold its 58.02% stake in Guinness Nigeria Plc to Tolaram Group in June, Heineken BV sold its majority stake in Champion Breweries PLC to EnjoyCorp Limited. Some other companies cut down its operations in Nigeria, Unilever Nigeria Plc ceased production of its home care and skincare products, including wellknown brands like Sunlight and OMO, Nigerian Breweries PLC announced the closure of its nine production plants, and ShopRite Nigeria ceased operation in Kano State and closed a branch in Abuja
The increased operational costs, due to the weakening currency and higher fuel prices, made it challenging for these companies to maintain profitability. Many of these multinationals had operated in Nigeria for years, but the combination of fiscal challenges and uncertain policy directions led them to divest. These exits left a gap in the FMCG sector, which was subsequently filled by Nigerian-founded businesses.
Local Businesses Step Up to Fill the Gap
Acquisitions and Expansions by Nigerian Companies
One of the most significant trends in the wake of multinational exits was the rise of Nigerian-owned companies stepping in to fill the vacuum left by foreign brands. Some companies took the opportunity to acquire the operations of multinational Firms that had decided to pull out. For instance, Tolaram Group acquired Diageo's 58.06% stake in Guiness Nigeria PLC in June; Oak and Safron Limited, a Nigerian Firm acquired the majority stake in the Belgian Conglomerate SIAT N.V. which holds 60% ownership stake in Presco Plc. These acquisitions not only provided Nigerian companies with an expanded market share but also enabled them to benefit from established brand recognition and supply chains.
Additionally, local companies launched new brands or expanded their operations to meet the growing demand for consumer goods. Notably, players like Bokku Mart expanded their presence and currently have over 60 retail stores in Lagos State which surpasses other retail stores like ShopRite, Prince Ebeano, Market Square, Justrite etc.
Similarly, OmniRetail, a B2B ecommerce platform launched its 50th Omnihub franchise in Lagos, aimed at bridging supply chain gaps and boosting the distribution of fastmoving consumer goods across underserved Nigerian communities.1
OmniRetail also acquired Traction Apps, a payment provider and inventory management solution for small businesses in Nigeria and aims to boost financial services and trade solutions for small and medium-sized enterprises (SMEs) within the fastmoving consumer goods (FMCG) sector.2
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