Major Nigerian firms report steep profitability declines as economic pressures mount, with only a few, like Unilever Nigeria, showing resilience.
Nigeria’s manufacturing sector has faced significant challenges over the past nine months, with financial reports revealing sharp declines in return on equity (ROE), a key metric of profitability.
Amid these difficulties, the sector has been burdened by a foreign exchange (FX) shortage, high energy and logistics costs, insecurity, and limited government support.
Notably, among the hardest hit are Dangote Cement and BUA Cement, with Dangote’s ROE falling from 20% in 2023 to 12% in 2024, and BUA’s dropping from 19.4% to 13.35%.
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Meanwhile, Nigerian Breweries Plc faced an even steeper decline, with its ROE plummeting to -173.23%, from an already negative 50.85%.
However, there are a few success stories. For example, Unilever Nigeria’s ROE rose from 11.08% in 2023 to 13.55%, driven by strong consumer demand and cost management.
Similarly, Champion Breweries also showed improvement, moving from a negative ROE of -0.7% to a positive 0.19%.
Despite these bright spots, confidence in the sector remains low.
The Manufacturers Association of Nigeria’s Confidence Index fell from 53.5% in the first quarter of 2024 to 51.9% in the second quarter.
This decline, is attributed to rising electricity tariffs, interest rate hikes, and inflation.
As a result, the tough economic climate has forced companies like PZ Cussons Nigeria, Kimberly-Clark Nigeria, and Diageo PLC to shut down.
Nevertheless, there is hope that strengthening manufacturing capabilities can reduce import dependence and curb inflation in the future.
