Manufacturers’ exports jump 77% on weaker naira

Three major manufacturers in the consumer goods industry have seen their export sales almost double within a year largely on the back of the liberalisation of the foreign exchange regime.

BusinessDay analysis of the latest unaudited financial statements of two multinationals and a local company shows that their combined revenue from exports surged by 77.4 percent to N15.5 billion in 2023 from N8.75 billion in the previous year, when their revenue rose by 3.92 percent.

The companies are Unilever Nigeria Plc, Cadbury Nigeria Plc and Okomu Oil Palm Plc.

Experts say the FX reform, which has weakened the currency by more than 60 percent, has made Nigerian goods cheaper for other countries, especially from Africa, that have stronger currencies.

“The increase we are seeing in exports is a natural consequence of the devaluation that occurred for other reasons or factors, not deliberately caused by the government to increase exports,” Gabriel Idahosa, president and chairman of the council of Lagos Chamber of Commerce and Industry, said.

He said countries often devalue their currencies to boost exports.

“But in Nigeria, it is not a deliberate policy decision to devalue the currency to increase exports.”

The FX reform implemented last June as part of the Federal Government’s measures to revive the economy has led to a large devaluation of the naira.

While the naira has continued to depreciate, the West African CFA franc, a legal tender in Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo, has appreciated.

This made some goods produced in Nigeria cheaper than other African countries. At the official market, the naira depreciated from 463.38/$ on June 9 to 1,435.5/$ as of February 2. The naira depreciated against the West African CFA franc from 0.76 per CFA1 on June 9 to 1.98 per CFA1 as at February 2.

Toye Folosho, an official at the Manufacturers Association of Nigeria (MAN), said the devaluation only favoured a few manufacturers that can export.

“But their cost of production has increased since their raw materials are not totally from the third countries. The import duty is close to N1,500 per dollar. So, the devaluation has caused terrible woes for a lot of them,” he said.

Further findings from the companies’ statements show that the export revenue of Unilever rose by 145.9 percent to N2.68 billion in 2023 and Cadbury’s increased by 123.5 percent to N4.85 billion. Okomu Oil Palm’s export sales also grew to N7.95 billion from N5.49 billion.

Out of the three manufacturers, only Cadbury reported an after-tax loss of N27.6 billion, the first time in six years, as against a profit of N583.1 million. Unilever and Okomu Oil Palm both reported after-tax profits of N8.54 billion and N21.16 billion respectively.

“The devaluation is helping exporters to bring FX back into the country which means more naira for them. But you have to remember that their cost of production is increasing,” Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group, (MANEG), said.

She added that when companies produce and export, they are competing with other countries that don’t have the currency issues the companies are facing in Nigeria.

“So, before you can send those products outside, you are going to produce it here and suffer the impact of the increase in the cost of production.”

Paul Odunaiya, managing director/chief executive officer at Wemy Industries Limited, told BusinessDay in an interview last year that the currency depreciation was helping his business in terms of exports and that one of the African countries that the company exports to is Mali.

“The devaluation of our currency helped us to enter the market because of the CFA.”

Comfort Ogunife, chief executive officer at Joyinten Limited, said her company is working on exporting some of her products.

“My company can earn more money by serving the small food industries in some of the African countries,” she said.

The devaluation pushed the country’s trade surplus in the third quarter of 2023 to the highest in five years and three months. A trade surplus occurs when a country’s exports exceed its imports.

According to the National Bureau of Statistics, the country recorded a positive trade balance of N1.89 trillion for the fourth straight time in Q3, a 166.2 percent increase from N708.9 billion in the previous quarter. It improved from a trade deficit of N409.4 billion on a year-on-year basis.

George Onafowokan, managing director/chief executive officer at Coleman Technical Industries Limited, said manufacturers are looking at going into other countries to source foreign exchange to remain in business.

“But how many manufacturers have the luxury to export? The majority of small and medium-scale ones don’t have that luxury; it’s only the top ones that might be able to export,” he added.

He said it is a good idea to look at the export incentives and opportunities, but wondered how many companies are capable of quickly doing things that are export-related.

In a recent report, Standard Chartered projected Africa’s total exports will reach $952 billion by 2035 from $645.3 billion in 2022 and that the African Continental Free Trade Area’s full implementation could increase the figure by a further 29 percent.

“Rising regional trade levels and greater connectivity will unlock high‑growth corridors across Africa and beyond. Intra-Africa trade is expected to reach $ 140 billion by 2035, equating to 15 percent of Africa’s total exports,” the report said.

Erewa-Meggison of MANEG recommended that the government needs to engage manufacturers and exporters directly through MAN, to identify at least five critical and immediate interventions that are required from the government.

“There are steps that they can take (including FX availability, single-digit loans, and payment of Export Expansion Grant) that will help exporters to become more competitive in the short term, while we work on the mid-term/long-term solutions,” she said.