How New York City Got Its Juicy Nickname “The Big Apple” — And What It Means To The World

                            

Multinational companies within the Fast Moving Consumer Goods (FMCG) subsector may consider exiting the country this year unless the operating environment undergoes improvements, according to a recent report titled 'Strategic Resilience: Sailing Through Business Disruptions' by financial solutions firm, Cardinal Stone.

The report highlights the persistent challenges of high operating costs faced by firms in the Fast Moving Consumer Goods sector. It emphasizes the sector's vulnerability to fluctuations in commodity prices, exchange rates, import and clearing duties, as well as freight costs.

The FMCG sector's ability to benefit from the moderation in global commodity prices is hindered by the substantial depreciation of the naira. The report points out the weakening of the currency from N422.00/$ in June 2023 to N951.94/$ in December 2023, following the Central Bank of Nigeria's decision to float the exchange rate. This move aimed to bridge the gap between the official rate and the alternative market, addressing the challenge of forex scarcity in the country.

"In 2024, we expect companies to continue re-imagining their operational strategies to achieve cost efficiency," the report stated. It also anticipates increased collaboration among FMCGs to enhance economies of scale, product portfolio diversification, revenue and cost synergies, technological innovations, and financial prowess.

The report cautions that failure to adopt such strategies may lead to exits from the operating environment or high-cost segments, akin to the cases of Procter and Gamble, GSK, Pernod Ricard, and Unilever.

Furthermore, the report identifies a potential surge in diesel costs due to a weaker currency, reminiscent of the first half of 2023 when diesel prices reached a new high of N1,004.98 per litre in the second half of the year.

The anticipated drag from higher energy costs is predicted to extend into 2024, unless there is an unexpected appreciation of the naira. The report also warns of elevated borrowings, influenced by the combined impact of dollar-denominated debts and the increase in naira values of operating and machinery costs funded with foreign currencies.

"The knock-on effect of these changes could translate to an increase in effective interest rates," the report concluded. As multinational FMCGs closely monitor these challenges, their decisions regarding continued operations in the country will likely be shaped by the evolving economic landscape in the coming months.