Three fast-moving consumer goods (FMCGs) firms listed on the Nigerian Exchange Limited (NGX) spent close to N1.3 trillion as cost of sales in nine months.
The amount represents a 110 per cent increase over N618 billion spent during the same period in 2023.
The firms – BUA Foods, Nestle and Cadbury – expended N1.27 trillion in cost of sales for the period.
The rising cost of sales shows the magnitude of challenges entrepreneurs face, especially those in the real sector of the Nigerian economy.
Stakeholders at the weekend, decried the impact of rising inflation on the cost, noting that most goods and services have recorded close to 100 per cent rise in prices over the last year.
Nigeria’s headline inflation rose to 32.7 per cent in September, up from 32.15 per cent in August 2024.
According to the operators, addressing the price pressures would require policy support, especially in incentives to help firms weather the economic turbulence.
They also suggested that firms should step up local sourcing of inputs to reduce reliance on imported materials while implementing stricter cost control measures to improve operational efficiency and ease the burden of rising production expenses.
Data from the NGX showed that BUA Foods’ cost of sales rose from N340 billion in the first three quarters of 2023 to N736.97 billion in 2024, representing 116 per cent growth.
The firm’s total operating expenses during the period also increased by 56 per cent to N43.86 billion from N28.18 billion, driven by an increase in selling and distribution costs.
The company said the high input cost environment and naira depreciation weighed heavily on prices of raw materials, resulting in a higher cost of production for the firm.
Nestle’s cost of sales during the period stood at N458.97 billion, a 94 per cent rise when compared to N236 billion spent in the corresponding period in 2023.
During the period, Nestle Nigeria’s raw material cost soared by over 100 per cent from N116.83 billion to N251.12 billion. The company also incurred N108.51 billion in direct overhead costs and N36.22 billion in direct labour costs in the first nine months.
For Cadbury, its cost of sales also increased to N74.8 billion from N42.9 billion, representing 74 per cent growth.
Head Equity, Planet Capital, Dr Paul Uzum, said most firms have raised salaries and wages to keep their experienced staff while lending rates have increased significantly for companies that rely on borrowed funds to do business.
“Tier-one companies like Dangote Cement, MTN and others are raising funds via commercial papers at about 30 per cent. If you require raw material inputs, you now have to buy the dollar at N1700 to import, which is about double what it was last year.
“Survival of firms now depends on their ability to transfer the rising cost to final consumers by raising prices too,” he said.
A research analyst at Cowry Asset Management Limited, Charles Abuede, said the recent depreciation of naira has jacked up production and input costs for many listed firms, which have significantly impacted their profitability.
