Market News

FX loans crucial to Nestle’s survival, says chair - PUNCH

MAY 28, 2024

By Oluwakemi Abimbola

The Chairman of Nestle Nigeria Plc, Gbenga Oyebode, has said that the foreign exchange loans from its parent company, Nestlé S. A. Switzerland, were necessary to keep the company running.

Oyebode said this during the firm’s 55th Annual General Meeting, which was held in Lagos recently.

The company, in an explanatory note to shareholders ahead of its Extraordinary General Meeting, revealed that the devaluation of the naira in June 2023 impacted the company’s foreign currency obligations.

It said, “Due to the steep devaluation of the naira during the year, the company’s foreign currency obligations, the majority of which are long-tenor inter-group loans owed to the parent company, had to be revalued at the 2023 closing rate of N907.11/$.

“From 2020 upwards, the parent company has steadily supported the company with loans to secure supplies of raw materials and equipment that are not available locally amid foreign scarcity in the country.

“The revaluation of foreign currency obligations resulted in an adverse impact of N195bn in 2023, resulting in a loss for the year of N79.4bn. It is noted that 94 per cent of N195bn pertains to unrealised exchange loss – N184bn on unmatured forex obligations.”

Addressing the concerns of shareholders about the foreign loans, which resulted in the company recording a N74.47bn loss after tax and non-declaration of dividend for 2023, Oyebode said the scarcity of foreign exchange in Nigeria had left the company with little or no choice but to take the loans from its parent company.

He said, “There was only one reason your company took foreign currency loans; it was the inability to source foreign currency in the country. It was not because it was the preferred way. Over the last five to six years, your company has been unable to source the foreign currency it needs to run the business.

“Yes, your company took foreign loans, but those foreign loans were the only way we could have kept this company alive. So, we had to do business and if you ask me, personally, having a parent company like Nestle that was willing to commit to Nigeria consistently over the period.”

However, some shareholders at the AGM expressed grievances that they were not paid dividends. They, however, lauded the management for steering the ship of the company successfully.

One of the shareholders, Timothy Adesiyan, said, “If not for the economic situation that we have found ourselves in, we would have been laughing as usual.

“We appreciate the management’s belief that the company is still standing while many have gone into oblivion. We know that what has happened is not a function of the company but of the economy.”

On his part, the Chairman Emeritus of the Independent Shareholders Association of Nigeria, Sunny Nwosu, observed that the chairman seemed to be concerned about the company’s customers, instead of paying attention to the investors, who provided the seed money for the business.

He said, “The quality of our products needs to be stronger than it was so that we can corner more of the market and ensure that our products are readily available in the market.

“On the issue of backward integration, we must ensure that we increase the use of local materials to help us. We must also stop taking loans in foreign exchange again.”

Another shareholder, Boniface Okezie, also empathised with the company, saying, “We know that Nestlé has been rewarding shareholders in the past, but this year is a different ball game. All of us have seen that in most manufacturing companies today, except the banks, which have the forex to do business, are the ones paying dividends.”

Meanwhile, shareholders approved the appointments of new members of the board, including Mrs Maryam Mohammed and Mr Namit Mishra, who was appointed as the firm’s finance and control director. Their appointment took effect on August 1, 2023.


This website uses cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you've provided to them or that they've collected from your use of their services
Real Time Analytics