As Nigeria faces one of its most turbulent economic periods, the challenges have mounted for multinational corporations operating within the nation. In the last few years, Nigeria’s fragile economy has forced many multinationals to scale back operations or exit entirely. Companies from Unilever to Shoprite, Diageo, GSK and South African Airways, among others have reduced their presence or departed, leaving local markets increasingly in flux.
The economy, with its reliance on imports and a high foreign debt burden, has suffered deeply from currency volatility. The Central Bank of Nigeria’s decision to float the Naira in mid-2023 led to its steep devaluation, worsening the challenges already posed by high inflation, supply chain disruptions, and a sluggish post-pandemic recovery. According to the World Bank, inflation in Nigeria reached 24% in 2023, one of the highest in sub-Saharan Africa, driven largely by increases in food, transportation, and energy costs. 2024 has seen even worst percentages.
As a result, operating in Nigeria has become substantially more costly for multinationals. The devaluation has led to skyrocketing costs for imported raw materials, while inflation has driven up wages, utilities, and logistics. For companies with foreign currency obligations like Nestlé, the Naira’s drop has intensified financing costs, adding a hefty financial burden.
Despite these hurdles, Nestlé Nigeria reported a 22.4% increase in sales revenue, reaching N547.1 billion in 2023. This performance is an increase of N100 billion over 2022, a reflection of both strategic price adjustments and high consumer demand for food essentials. However, while the top-line growth is impressive, Nestlé Nigeria’s Profit After Tax (PAT) showed a different story, with a significant loss of N79.5 billion for the year.
The currency devaluation severely impacted Nestlé’s balance sheet, inflating its foreign currency debt obligations and increasing its financing costs. While gross profit increased by 39.4%, reaching N217.2 billion from N155.8 billion in 2022, the elevated financing costs associated with currency devaluation outpaced operating profits, driving the PAT loss.
Its Managing Director, Mr. Wassim Elhusseini, acknowledged these economic pressures, commending the team for their resilience. “The devaluation of the Nigerian Naira in 2023, which led to a revaluation of our foreign currency obligations, undoubtedly impacted our financing cost and consequently the profit after tax,” he noted, emphasizing Nestlé’s commitment to weathering these economic conditions through responsible operations and local sourcing efforts.
Nestlé Nigeria’s story is one of resilience against a backdrop of departure by other global players. Since 2019, several large corporations have pulled back operations in Nigeria, citing challenges ranging from foreign exchange scarcity to regulatory hurdles and infrastructure deficits.
In response to these pressures, Nestlé Nigeria has pursued a strategic shift toward increased local sourcing. By sourcing ingredients locally, the company has not only reduced exposure to currency fluctuations but also contributed to the local agricultural value chain. This approach aligns with Nestlé’s commitment to creating shared value, promoting economic development within its communities, and supporting local farmers and suppliers.
In 2023 alone, Nestlé Nigeria invested millions in its local supply chain, increasing production from Nigerian-sourced ingredients like grains, cocoa, and vegetables. This strategy reduces the dependency on imports and foreign currency, a critical factor in an environment where exchange rates remain volatile. Elhusseini reiterated Nestlé’s focus on responsible local sourcing, saying, “We remain steadfast in optimizing our operations to ensure the availability and accessibility of affordable and nutritious products to our consumers.”
Nestlé’s efforts extend beyond operational efficiencies; the company has made notable contributions to social and community welfare. At the 2023 Sustainability, Enterprise, and Responsibility (SERAS) CSR Awards, Nestlé Nigeria was recognized for its initiatives supporting food security, rural integration, and overall corporate responsibility. These community-focused programs aim to empower rural populations through nutrition education, access to clean water, and sustainable agricultural practices.
Financial analysts view Nestlé’s approach as a model for multinational firms operating in emerging markets. Although the current environment is challenging, Nestlé’s strong revenue growth, operational strategies, and focus on community value illustrate a roadmap for other companies facing similar conditions.
Despite an N79.5 billion PAT loss driven by external economic factors, the company’s top-line growth and local sourcing initiatives show a commitment to long-term success. As Nigeria continues to navigate economic challenges, Nestlé’s strategic focus on local integration and community investment offers a blueprint for enduring growth and underscores the power of the Nigerian spirit to persevere through hardship.
