Industry stakeholders have said most companies operating in the country intend to increase product prices by 10 to 20 per cent to offset the impact of naira devaluation on imported cost of goods sold and higher inflation.
According to them, the companies have not seen an improvement in FX availability in the interbank market since the devaluation in June 2016, which has resulted in capital expenditure deferral and rising FX related trade payables.
The chairman of Flour Mills of Nigeria Plc, John Coumantaros said the company will increase the prices of its products due to a fall in crude prices, a weak naira and rising input costs.
According to him, the fall in crude oil prices has caused a budget deficit and necessitated the pegging of the naira to the dollar. This, according to him, unfortunately led to the scarcity of forex, and a simultaneous increase in prices of inputs of industries, such as its own.
“Even though the peg had been removed and the naira devalued for almost three months, foreign investors are still reluctant in pouring in their forex into the economy, which is creating problems for industries that import their inputs such as Flour Mills of Nigeria.”
Also, Dangote Cement has explained why it had to increase cement prices by as much as N600.
According to the cement company, disruptions in gas supply has increased the cost of powering their plants since they now have to switch to the more expensive LPFO and coal.
The company also blamed the devaluation of the naira in over the past few weeks as another reason for increasing the price of a bag of cement.
Despite the frail macroeconomic conditions and tough operating environment, analysts said some consumer goods firms will weather the storm, given their market penetrating products and excellent distribution channel.
Meanwhile, manufacturers and companies are also calling on government to ease the ban on the 41 items, as most of the raw material component of certain products can only be sourced abroad.