Daily Watch – Weak naira puts pressure on FMCG firms, Samsung and LADOL bring in big money

17th February 2016

  • The effect of the increasing cost of doing business, along with slowing economic growth is manifesting in the recent numbers of Fast Moving Consumer Goods (FMCG) firms operating in Nigeria, as production costs spike, as a result of foreign currency restrictions. Most manufacturers in Nigeria import raw materials, making the rising cost of the American dollar have an impact on production costs. Experts say that beer makers and flour millers import more than 50 percent of their raw materials and other inputs, which means they are hard hit by the impact of the falling naira, despite falling commodity prices at the international markets.
  • Samsung Heavy Industries and Lagos Deep Offshore Logistics (LADOL) are pouring $400 million in a vessel fabrication and integration yard in Lagos, with an additional $200 million to follow in months to come. The Base is a new, state-of-the-art logistics facility, strategically located on an island at the point of entry into Lagos harbour, directly opposite Apapa Port in the LADOL Free Zone. LADOL and Samsung Heavy Industries in October 2014 broke ground on a $300 million vessel fabrication and integration facility. The NLNG in April 2015 also announced a $1.5 billion dollar deal with Samsung and Hyundai to build 6 new ships.
  • Savings from the removal of removal of subsidy on both petrol and kerosene continue to grow on a daily basis leading to over N18.3 billion on petrol and kerosene between January 1 and February 12 this year an interval of about six weeks. Results from the pricing templates for both commodities obtained from the PPPRA show that, when multiplied by the average over recovery on the product and the number of days (January 1 to February 12), Nigeria made extra cash of N15.88 billion from the sale of petrol alone.
  • Saudi Arabia has provisionally agreed with Russia to freeze oil output at January levels, in a co-ordinated move to reduce a supply glut and shore up prices. After more than 15 months of opposition to unilaterally cutting oil supplies, Saudi Arabia’s powerful oil minister Ali al-Naimi said the agreement between some of the world’s major producers to freeze output should be enough to stabilise the market, which has been hit by a 70 per cent slide in prices. The announcement followed a closed-door meeting in Doha between Opec powerbroker Saudi Arabia and Russia, the largest exporter outside the cartel, as well as Venezuela and Qatar. News of the meeting only leaked late last night, surprising oil markets and sending prices up by as much by 6 per cent on Tuesday morning. Brent crude oil, the international benchmark, closed at $32.23.
  • The Senate has ordered the Nigerian Electricity Regulatory Commission (NERC) to suspend the February 1, 2016 tariff hikes, which are estimated to be upwards of 40 per cent with immediate effect. Senate President, Bukola Saraki said the move became necessary because any increase in cost, without the necessary improvement in service delivery by the power companies is unacceptable. The Senate also said that the power distribution companies must work to ensure that every establishment in Nigeria is provided with capabilities for metered billing. NERC had released a new electricity tariff regime for electricity users in the country. Alongside with this new tariff, NERC also announced the removal of fixed power charges for all classes of electricity consumers, stressing that power users would henceforth only pay for what they consume.