Manufacturers Wail As Unsold Goods Pile Up In Warehouses by HenryThegreat1(m): 4:59am On May 20 |
…As cost of living rises, purchasing power drops
Manufacturers of fast-moving consumer goods, FMCG are in dire agony over the continued rise in unsold goods in their warehouses, a development which would lead to a further significant decline in output level in the sector.
The continued rise in unsold goods is caused by two factors namely the rising cost of living and the declining purchasing power of the citizens.
Financial Vanguard’s findings show that due to the downturn in the consumers’ disposable income, the stock of unsold goods for manufacturers in the fast-moving consumer good, FMCG, sector of the economy rose Year-on-Year (YoY) by 27 per cent during the financial year ended December 31, 2023. The sector operators also indicated that the situation is worsening in 2024 as they expect to report over a 30 per cent rise in unsold goods in the first quarter of the year, Q1’24.
Consequently, they hinted that the output levels have been going down steadily since mid-last year, when the Central Bank of Nigeria (CBN), the report showed that capacity utilisation in the food and beverages sector fell to 49 per cent from 61 per cent in the corresponding period in 2022, indicating a 20 percentage point decline.
Nigerians have been battling with inflationary pressures with its curtailing effect on consumers’ purchasing power in the last eighteen months.
The headline inflation rate has been on a constant increase, rising to 28.82 percent in December 2023 from 21.34 per cent in December 2022, triggered by various factors including high energy cost, and insecurity, especially in the farming communities in Nigeria, among others.
Within the same period also, food inflation surged to 33.93 percent from 23.75 percent a year ago.
The trend has continued unabated in 2024 with headline and food inflation moving further up to 33.69 per cent and 40.53 percent in April from 29.90 percent and 35.41 percent at the beginning of the year respectively.
A combination of the massive increase in inflation coupled with naira devaluation had resulted in price mark up by manufacturers to cover high input costs.
But this cost coverage measure has also alienated many of their consumers, thereby slowing down sales.
Financial Vanguard’s findings from the operations of 15 major FMCGs clearly show a burdensome price index escalating the stock of unsold goods amounting to N104.45 billion despite the huge cut in production quantity.
The companies are BUA Foods Plc, Dangote Sugar Refinery Plc, Nestle Nigeria Plc, Presco Plc, Cadbury Nigeria Plc, Okomu Oil Nigeria Plc, NASCON Allied Industries Plc, May & Baker Nigeria Plc, Fidson Healthcare Plc, and Neimeth Pharmaceuticals Plc.
Others are Guinness Nigeria Plc, Champion Breweries Plc, Flour Mills of Nigeria Plc, Nigerian Breweries Plc and Honeywell Flour Mills Plc.
Companies’ records
The breakdown shows that while a number of the companies recorded a reduction in the level of their stock of unsold goods, palm oil producers – Okomu Oil Palm Plc and Presco – took the biggest hit. Industry observers believe the oil palm industry should not be recording such poor performance given how essential the product is to the average Nigerian family.
Presco, the leading palm oil producer, recorded the highest stockpile of unsold goods as the inventory of finished unsold goods rose by 249.4 per cent to N1.45 billion, followed by May & Baker Plc and Okomu Oil Palm, the second largest palm oil producer, with 160.2 per cent and 124 percent increase in their inventory of unsold goods respectively.
Dangote Sugar Refinery Plc, Flour Mills of Nigeria Plc and Cadbury Nigeria Plc also ranked among the worst with record increases of 92.9 percent to N9.76 billion, 74.1 percent to N30.75 billion and 71.5 per cent to N3.55 billion in their stock of unsold goods respectively.
Strangely, all brewers in the report recorded reduction in their unsold goods.
Until economic indices stabilise, situation may persist —NACCIMA
Reacting, Director General of the Nigerian Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), Sola Obadimu, said the findings are not surprising, adding that until economic indices are stable, the situation may persist.
His words: “As I always say, we’re in a ‘stagflation’ situation, meaning – persistent rising inflation and high unemployment rates in a static wage situation. The wages are not just static, they’re declining in value in real terms as a result of inflation. Consumers (and industries as well) are also vulnerable/defenceless victims of rising energy costs, unstable forex rates and debilitating infrastructure generally, etc. So, it’s no surprise that inventories are growing.
“We’re all aware of the fact that some major multinationals declared losses for 2023 as a result of the unfavourable economic climate and some chose to leave while others are contemplating. It’s easier for local industries and businesses whose owners can quickly take decisions in the face of constantly changing critical economic indices. These multinationals sometimes have to seek aporovals for some major situations from their global Head Offices which may take a while to come due to lack of adequate understanding of the local environment.
“So, unless we get some sort of stability in critical economic indices and consumer purchasing power increases in value terms, the story may not agreeably be too different in 2024.”
Consumers preference has shifted — Muda Yusuf
Muda Yusuf, Director General, Center for the Promotion of Public Enterprise (CCPE), who blamed the mounting inventory of unsold goods on depreciation in the value of the naira, and high energy cost among others, said that consumers are now reviewing their preferences and are shifting to cheaper substitutes where available.
He said there’s a need to bring down the exchange rate and energy cost to effect a reduction in companies’ cost of production.
He said: “The high level of inventory of finished goods, particularly the unsold inventory, are the consequences of high production cost and the high operating cost that the manufacturers in the FMCG sector have been grappling with over the last one to two years.
“There have been challenges of escalation of cost arising from exchange rate depreciation, high energy cost, high cost of logistics and challenges around the high cost of funds.
“These are the key issues and, naturally, when the production and operating costs increase, the natural thing is for the increase in cost to be passed on to the consumers in the form of high prices.
“So, what we are seeing is that the prices of some of these products have gone up significantly and some by as high as 50% and in some cases, even 100% in the last year.
“And in an environment where the purchasing power is also weak, where the level of poverty is also high, naturally, these inventories will be very slow in terms of outflow from the warehouses because of the weak purchasing power of the consumers.
“There’s also an element of consumer resistance due to this high cost of production. There is also an element of substitution. For some of those products that have substitutes, consumers may decide to go for cheaper substitutes because of the high prices.
“So, basically, these are the factors that are responsible for the high level of inventory of finished goods that we have seen in recent times.”
Speaking on the way out, Yusuf said there’s a need to put strategies in place to ensure a reduction in operating cost, a reduction in logistics costs and a strengthening of the purchasing power of the citizens.
Need to stabilize FX market
He expressed the need to stabilize and boost supply in the foreign exchange (FX) market in order to moderate the depreciation of the currency.
According to him, this will result in a reduction in operating and production cost.
“Once the currency strengthens, the cost of production will, naturally, be less; the cost of logistics, if the energy crisis goes down, will also begin to decelerate.
“Then, of course, there’s also the element of the cost of clearance of cargo.
“These cargoes could be raw materials, it could be intermediate products, and it could be machinery that is used by any of these manufacturers.
“The current methodology of determining the exchange rate for the computation of import duty has made the cost of cargo clearance very prohibitive.
“So, if the government through the fiscal and monetary authorities could do an adjustment to this by fixing the exchange rate for the computation of import duty to between N800 – N1,000/$ and this is fixed for may be three months, that will also help to bring down some of this cost and make the products a lot more affordable because the key issue here is the affordability of these products.
The more affordable they are, the lesser the level of unsold goods,” Yusuf added.
According to him, “The danger in the level of this unsold inventory is that some of these products have expiry dates, which is another risk to these businesses.
It is a good thing that the government is talking about minimum wage. If the workers are empowered, we are likely to see an improvement in demand for some of these products.
“So, there’s a supply side issue to bring down the costs of production, operation and logistics and cost of funds.
“There’s also the demand side issue of empowering the consumer to have the purchasing power to buy these products.”
Rise in unsold goods weakens profitability — FSL Securities
Commenting also, Victor Chiazor, Head, Research at FSL Securities, said: “The 27% rise in inventory for players in the fast-moving consumer goods sector could be attributed to two factors.
“The first could be that the rise is a result of the company’s inability to drive sales due to the rising cost of goods which may have slowed down the volume of goods sold during the period, leading to a rise in inventory.
“Also the second reason for the increase in inventory could be deliberate and the company may decide to increase its inventory position to enable it to plan around the significant volatility in the cost of goods which has remained unpredictable in recent times.
“This helps the company manage the risk around a possible increase in production cost. “However, whatever the case may be, it has a terrible effect on the course of operation for the business as a slowdown in sales will weaken profitability and a deliberate strategy to increase inventory also ties down capital which could have been raised via borrowing at a high-interest rate given the interest rate environment.
“The government will have to deal with issues around FX volatility, rising energy cost, rising cost of borrowing, bad infrastructure amongst other issues, all of which increase input cost for the manufacturer.” https://www.vanguardngr.com/2024/05/manufacturers-wail-as-unsold-goods-pile-up-in-warehouses/ 1 Like |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Deltafirstson(m): 5:01am On May 20 |
They should not fail to record this as part of Tinubu’s administration one year in office achievement. You just came in to office and destroyed everything you met just within one year in office. You completely reduced Nigerians social life and purchasing power. 194 Likes 26 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Alhajikd: 5:30am On May 20 |
They should go and tell the senseless criminal staying in aso villa and stop disturbing our peace
Everybody must collect. Including the senseless agbadorians supporting nonsense
Next time, when you hear Tulumbu is on the ballot paper, no be person go tell you to take off and vote a sensible leader. Not a vegetable that will soon go and meet his imaginary 72 holoshos 94 Likes 8 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by gozmok1(m): 5:30am On May 20 |
You go to hospital you don't care where the doctor comes from, you don't care about his religion... All you seek is good service
You put your money in banks you don't care where the owner is from, what his religion is
But time to elect President you say you can't vote a Christian, or an Igbo man continue
When you guys are ready enter the streets and protest and I pray what happened to endsars protesters happens to you all 178 Likes 16 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Racoon(m): 5:32am On May 20 |
The continued rise in unsold goods is caused by two factors namely the rising cost of living and the declining purchasing power of the citizens. A balabloo-blu-bulava druggie, stolen mandate Tinubulation Economics. "Reduce the purchasing power of the people and slow down the economy" - Tinubu. 50 Likes 1 Share |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by nedu666: 5:38am On May 20 |
Milo sachet 200 Holland milk 150g 200 Bread small 1000 Golden morn 900g 2k Cornflakes 1kg 2500 Carbonated drinks 350
Why won't there be unsold goods when prices keep rising while income is static. Even toyota camry is 100 million naira. 42 Likes 2 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by helinues: 5:41am On May 20 |
Toh
Sebi they are all waiting for dollars to keep on rising so that they can be increasing the products prices ridiculously.
Na so God go dey continue punishing those who are making life unbearable for the ordinary citizens including the politicians 142 Likes 12 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by SpecialAdviser(m): 5:48am On May 20 |
helinues: Toh
Sebi they are all waiting for dollars to keep on rising so that they can be increasing the products prices ridiculously.
Na so God go dey continue punishing those who are making life unbearable for the ordinary citizens including the politicians May BATeria from Tinubu dripping dirty pampas catch up with you there. What is the meaning of this gazarella gazarella you wrote here? 76 Likes 6 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by helinues: 5:53am On May 20 |
SpecialAdviser:
May BATeria from Tinubu dripping dirty pampas catch up with you there.
What is the meaning of this gazarella gazarella you wrote here?
Should I re write it in pidgin so that you can be able to comprehend it? 106 Likes 4 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by magoo10(m): 6:21am On May 20 |
Tinubu's plan is to reduce purchasing power thereby killing businesses. Right now manufacturing products should take a halt because the reality is people cannot afford them.the evil government says pack your loads and go home
Anybody happy with this is an enemy of the people. 26 Likes |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Macphenson: 6:26am On May 20 |
Widen the tax net, reduce the purchasing power of people. 30 Likes 2 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Alhajikd: 6:46am On May 20 |
helinues: Toh
Sebi they are all waiting for dollars to keep on rising so that they can be increasing the products prices ridiculously.
Na so God go dey continue punishing those who are making life unbearable for the ordinary citizens including the politicians Chief Zombie, you just cursed yourself so. And God will continue to punish sadists and wicked people supporting evil government And so shall it be 80 Likes 8 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by masterfactor(m): 6:47am On May 20 |
What do they expect, Everybody is just surviving in Nigeria. 1 Like |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by helinues: 6:47am On May 20 |
Alhajikd:
Chief Zombie, you just cursed yourself so. And God will continue to punish sadists and wicked people supporting evil government And so shall it be I will report this your new trolling moniker if you don't stop the trolling this morning 86 Likes 4 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Alhajikd: 6:50am On May 20 |
helinues:
I will report this your new trolling moniker if you don't stop the trolling this morning 54 Likes 6 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by michlins(m): 6:51am On May 20 |
helinues: Toh
Sebi they are all waiting for dollars to keep on rising so that they can be increasing the products prices ridiculously.
Na so God go dey continue punishing those who are making life unbearable for the ordinary citizens including the politicians the nonsense that usually comes out through your head amazes every rational person. So government which you support destroyed the economy and purchasing power of the people and now, the business owners who are suffering as a result is to blame. I thought the government wanted to force them to sell at a loss? Why did they stop? Ordinary petrol is now going for ₦900/l and you still have the guts to blame the masses who have already been destroyed 68 Likes 6 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by helinues: 6:54am On May 20 |
michlins: the nonsense that usually comes out through your head amazes every rational person. So government which you support destroyed the economy and purchasing power of the people and now, the business owners who are suffering as a result is to blame.
I thought the government wanted to force them to sell at a loss? Why did they stop?
Ordinary petrol is now going for ₦900/l and you still have the guts to blame the masses who have already been destroyed You people should stop cherry picking from my comments. Except if you put chewing gum for your eyes you won't say you didn't see where I lambasted the politicians including the FG 88 Likes 1 Share |
|
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by AcuraZDX: 7:03am On May 20 |
helinues:
You people should stop cherry picking from my comments.
Except if you put chewing gum for your eyes you won't say you didn't see where I lambasted the politicians including the FG Clown. If you have ever ran or owned a business, you won't be saying the kind of nonsense you say. That same manufacturer you're blaming is facing electricity hike, fuel price hike, which is caused by the government and you expect him to still sell his goods below his expenditure? You really need to get something productive doing. Oloun. Idleness has damaged your thinking ability. My 2 cent.. 61 Likes 6 Shares |
|
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by helinues: 7:05am On May 20 |
AcuraZDX:
Clown.
If you have ever ran or owned a business, you won't be saying the kind of nonsense you say.
That same manufacturer you're blaming is facing electricity hike, fuel price hike, which is caused by the government and you expect him to still sell his goods below his expenditure?
You really need to get something productive doing. Oloun.
Idleness has damaged your thinking ability. My 2 cent.. You said they are experiencing electricity hiked and fuel price hiked right. Who then increased the prices of goods ND services for that same excuse? You forgot to boldened your comments today? 86 Likes 2 Shares |
|
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Justiceganduje: 7:14am On May 20 |
helinues:
You said they are experiencing electricity hiked and fuel price hacked right.
Who then increased the prices of goods ND services for that same excuse?
You forgot to boldened your comments today? 24/7 things. 1 Like |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by Beautifulday: 7:24am On May 20 |
If the people don't have money to buy, they won't buy. Person wey him salary nah 50k, wetin him fit buy in a whole month when transport, electric bill, medical bill, water bill, water disposable bill, house rent, etc dey inside the 50k?
You go just buy wetin go keep you alive hoping things change for you.
Imagine when 90% of the citizens of a country fall into this bracket as it is with Nigeria right now. 18 Likes |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by LexngtonSteele: 7:58am On May 20 |
A lot of businesses will go down. Not being pessimistic. Yes it will be really hard for purchasers to buy imported items now that USD = 1540. But it's hard to pity the sellers too. 99% of them quickly jerk up prices as soon as dollar rates go up and NEVER bring them back when rates go down. Car dealers that bought cars in 2015/16 kept adjusting prices instead of selling with reasonable markups. The consequence = eventually, customers wouldn't be able to buy again and your inventory will just rot. I laugh when I see people who bought gym equipment in 2015/16 adjusting rates to 2024 rates. You never even sell am for years you dey adjust. Na you go carry your thing, build muscle last last 28 Likes 6 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by 2mch(m): 8:11am On May 20 |
Make dem reduce price and sell at a loss. The government. Should also give businesses with losses Tax breaks to balance it out. It’s tough times everywhere in the world. But in Nigeria, the way they hike prices does not align with the inflation. Greedy people seeing opportunity to make money are the cause of this. 4 Likes 2 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by PARADIZEPRIEST: 9:14am On May 20 |
EAT THEM NOW OR SEND THEM TO PUBLIC OFFICE PEOPLE WHO EMBEZZLE OUR MONEY. WHEN YOU PUT THE PRICES AT THE ROOF ,WHAT DO YOU EXPECT? PEOPLE ARE GOING BACK TO VILLAGE LIFE,CITY GOODS WILL SUFFER. 4 Likes 1 Share |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by nlreserve: 9:24am On May 20 |
helinues:
You said they are experiencing electricity hiked and fuel price hiked right.
Who then increased the prices of goods ND services for that same excuse?
You forgot to boldened your comments today? u no know anything. Do you think traders just wake up and increase prices of their goods? It's how they bought they would sell. Now that customs have increased their import duty, prices of things are bound to rise in coming days. You want to blame sellers? No, blame the customs/government. Odeh 22 Likes 6 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by helinues: 9:25am On May 20 |
nlreserve: u no know anything. Do you think traders just wake up and increase prices of their goods? It's how they bought they would sell. Now that customs have increased their import duty, prices of things are bound to rise in coming days. You want to blame sellers? No, blame the customs/government. Odeh Stop jumping on my mentions, read and comprehend before you do your as usual trolling 4 Likes 2 Shares |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by sanpipita(m): 9:26am On May 20 |
APC urchins will add this to list of agbado achievements 8 Likes |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by demolagilbert: 9:43am On May 20 |
Not surprised The signatures are adding up. Let's make this a reality So, I created a petition that seeks to end the rip-off IELTS keeps perpetrating with the 2-year validity of their test results, particularly for high scorers who scored btw Band 8-9. Surely, someone who got a band 9 shouldn't, wouldn't, couldn't have lost the skill that earned him/her a band 9 after two years. Pls join the petition and let's make this change happen. Share across all platforms, as millions stand to benefit. Lifetime validity of test results! https://www.change.org/LifetimeValidity4IELTSresults 4 Likes |
Re: Manufacturers Wail As Unsold Goods Pile Up In Warehouses by nlreserve: 9:54am On May 20 |
helinues:
Stop jumping on my mentions, read and comprehend before you do your as usual trolling You need to be corrected because tribalism is preventing u to see reality 14 Likes 4 Shares |