Some economists and industry operators have decried the unfavourable operating climate and called on the federal government to urgently address the constraints and challenges facing the Fast Moving Consumer Goods (FMCGs) sector in the country.
Speaking on a programme monitored on Channels Television, the chief executive of the Financial Derivatives Company Limited, Mr. Bismarck Rewane, in response to a question, listed some bottlenecks facing the under-performing companies in the above-mentioned sector which is also affecting their financial performance to include infrastructural constraints, low purchasing power and an unpredictable business environment.
Rewane said: “Some of these constraints are self-inflicted. Take for example the Apapa gridlock, take for example the cost of funding, and low productivity. So we have all of these things. But more importantly is that in the National Income Identity Equation, you have government expenditure, but the most important component of this is investment. Total investment in Nigeria is about $65 billion; it is less than 17% of the total Gross Domestic Product (GDP).
“A combative regulatory environment; an extortionary regulatory environment and policy making environment is what kills investment. And investors are not interested in what you say because what you do is more important than what you say. What you are doing could be combative or disruptive while what you are saying is creative.
“Talking about flour, price of wheat has gone up by almost 30 per cent in the last year or 18 months. But the price of wheat now in Nigeria has gone up by almost 10 per cent The result is that, and the exchange rate has moved, okay now positively and they have the availability of foreign exchange; good news.
“But the reality is that Flour Mills of Nigeria has shown a 10 per cent drop in revenue, and a 15 per cent drop in PBT (Profit Before Tax). Honeywell has two per cent, three per cent dropped in revenue and 83 per cent drop in profit. Everybody is suffering this.
“The problem is that there is low purchasing power. You know we haven’t done the minimum wage review for the past eight or nine years. There is low purchasing power; there is drop in productivity and there is high-interest rate environment.
“So people are confronted with all of these things and therefore you need to do something dramatic”, Rewane advised.
The financial market expert added: “The cost of the Apapa gridlock is about N2 billion a day while the cost of the subsidy is about N4 billion a day. If you add those two together, it’s N6 billion; infact that is 50 per cent of the budget of Nigeria. If you just deal with those constraints of the Apapa gridlock and the subsidy, deal with it.”
His response also corroborated the factors identified by the Group Managing Director/CEO of Flour Mills of Nigeria Plc, Mr. Paul Gbededo, recently.
Gbededo had in an interview, also enumerated challenges facing flour millers and the need for government to encourage inclusive, sustainable and enforceable policies to encourage local investors.
He also called for greater control on the quality of imported and home-grown wheat and better infrastructure, especially access routes at the factories and ports.