Flour Mills Nigeria says naira devaluation will hurt its profit margin, as it finds it difficult to pass the rising costs to consumers.
The Group Managing Director, Paul Gbededo, disclosed to journalists in Lagos that Flour Mills had taken half the risks of >naira’s devaluation, which weakened by 25 per cent in Q1 2020.
Flour Mills has only adjusted its prices by 12 per cent.
Gbedebo said that the company sources 25 per cent of its raw materials locally and planning to increase it by 40 per cent in 2024, in view of forex constraints.
The company began to source its raw materials locally during the 2016 currency crisis in Nigeria.
The plan to increase local sourcing of raw materials is expected to help the company reduce the cost of maize per tonne, following the Central Bank of Nigeria’s announcement in July that it would stop issuing forex to maize importers at the official rate.
The GMD, however, noted that despite CBN’s aggressive forex policies, Nigeria still does not have the capacity to meet its local maize demand.
He revealed that the company was working to change its debt structure by focusing on more long-term borrowings.
Flour Mills had earlier concluded plans to issue a bond within the next two months, as part of a N70bn ($184m) programme to re-finance existing debt.
