The listed brewers in Nigeria reported a combined loss of N169.7 billion in the first quarter of 2024, according to a BusinessDay analysis of their financial statements.
Champion Breweries Plc, Nigerian Breweries Plc, International Breweries Plc, and Guinness Nigeria Plc faced severe financial challenges due to rising interest rates and further devaluation of the naira. In the first quarter of the previous year, three of these brewers reported a total loss of N54.3 billion, while Guinness Nigeria posted a profit of N1.84 billion.
Experts attribute the increasing costs of production and the overall cost-of-doing-business crisis in Nigeria to steep naira devaluation and high interest rates.
“The major concern leading to negative retained earnings in the breweries sector is largely due to recent naira devaluation, which has significantly impaired value for businesses with substantial dollar exposures amid a prolonged decline in purchasing power in the Nigerian economy,” said Ayodeji Ajilore, an investment research analyst with ARM.
International Breweries recorded a foreign exchange loss of N162.2 billion in Q1, down from an FX gain of N1.22 billion. Nigerian Breweries’ FX loss widened to N72.85 billion from N14.64 billion. Guinness Nigeria reported an FX loss of N37.06 billion, up from N4.28 billion, while Champion Breweries recorded an FX loss of N0.74 billion, compared to no FX loss in the same period of the previous year.
Nosike Nwajide, team lead of the research arm at Agusto & Co., noted that the weak naira has escalated costs associated with foreign debt service obligations, further straining profit margins.
“The shift to a floating exchange rate caused a steep depreciation of the naira, resulting in significant FX losses in the industry,” he said.
The beer industry contributes to Nigeria’s growth through its domestic and international operations and its global supply chain. In 2019, the global beer industry supported a $2.2 billion GVA contribution to Nigeria’s GDP, accounting for 0.6 percent of the national GDP, according to Oxford Economics.
Apart from the weak naira, experts also attribute the losses recorded by beer manufacturers to low consumer spending. Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, said consumer purchasing power has been depleted.
“Inflation has reduced the purchasing power and disposable income of consumers, forcing them to prioritize their spending,” Egbesola said. “Currently, many alternatives to alcohol are available in the market, and competition is very stiff.”
Uchenna Uzo, professor of marketing at Lagos Business School, noted that household incomes are failing to keep pace with the country’s accelerating inflation, shrinking wallets, and fueling low demand.
“People are not buying as much as they would before the economic conditions in Nigeria,” Uzo said. “There is also more variety in terms of different types of beers available, with cheaper variants leading people to explore lower-quality alcoholic beverages at reduced prices.”
He added that macroeconomic headwinds are affecting beer makers as all related costs continue to surge.
