Heineken Nigeria unit says lack of cash adds to inflation pain

Nigeria | What a blunder. The new naira notes rollout caused a shortage of cash and worsened a lack of consumer demand for beer, Nigerian Breweries, a unit of Heineken, said on 24 February.

In October 2022, the Central Bank of Nigeria announced that the highest denominations of the naira, the Nigerian currency, would be redesigned, giving a deadline of 31 January 2023 for all old notes to be deposited in banks in exchange for new ones.

In Nigeria’s cash-dominant economy, the Central Bank hoped that the new notes would help curb corruption and currency fraud, tackle the growing menace of kidnapping for ransom, and lower inflation. However, the Central Bank delivered too few of the new notes into circulation, which led to long queues, street protests and ultimately an extended deadline.

No notes to buy beer

The chaos was also criticised by candidates running in the presidential election, which was held on 25 February. They rightly feared that they would not obtain enough notes for their “cash politics”, whereby political parties charm voters, usually by offering cash or beer prior to an election, or during an election to buy votes.

The inevitable happened. No notes, no beer. The total beer market decreased by a high single digit in 2022, market leader Nigerian Breweries reported.

“Nigeria’s business environment remains very turbulent,” Hans Essaadi, CEO of Nigerian Breweries, said. “The naira scarcity has aggravated things.” Inflation rose to 21.8 percent in January, the highest since September 2005.

While Nigerian Breweries grew its net revenue 26 percent to NGN 551 billion (USD 1.2 billion) in 2022, driven by strong pricing, costs of sales rose 22 percent to NGN 337.3 billion (USD 733 million).

The company’s profit before tax was down 27 percent to NGN 17.3 billion (USD 37.6 million), yet profit after tax grew 4 percent to NGN 13.2 billion.

In better days, Nigerian Breweries reported a profit after tax of NGN 33 billion (2019), or NGN 28.4 billion (2018).

To keep its shareholders sweet, Nigerian Breweries’ Board of Directors declared a total dividend of NGN 13.9 billion, more than the firm earned in net profit.

The brewer of Star Lager, Legend Extra Stout, Heineken, Tiger, Desperados and Maltina malt drinks expects that the demand for its products will bounce back after the election and when the cash crunch normalises.

On 1 March, the ruling party’s candidate, Bola Tinubu, was declared the winner. The 70-year-old veteran politician got 37 percent of the vote, official results show.