The best medicine and “cool stuff” in Nigeria now is FOOD. With inflation high, few can afford medicine and drugs. Drinking some alcohol and special beverages is now in the luxury phase. Looking at this and the near-term outlook, the parent of Guinness, Diageo, thinks Nigeria may not be cutting it. So, it is selling and exiting the market.
This is predictable. Yes, it is easier for a “local” firm to run the show [the buyer is actually a Singaporean firm which continues to move into many sectors with no immediate need to send money back home]. The instability of the Naira is the biggest challenge in Nigeria. The exchange rate is not an issue that much. Simply, the Naira must be stable to enable investors and companies to plan.
As I noted in June 2023, the reason given for the Naira floating policy was wrong: the imbalance between the official and black-market rates of Naira and Dollar was never a big problem. So, justifying the floating policy on it was a mistake, because the people who move the economy, big multinationals operate on stability. Provided there is a fairly stable exchange rate, the absolute number is always manageable by companies.
That is why despite years of changes in our exchange rates, we have never had this type of shock. But when the exchange rate changes like Bitcoin, from week to week, you destroy businesses’ capacities to model operations. And that is what we are experiencing now.
I call on the government to change the floating policy. I have provided a way to change course here. I warned Nigeria in June 2023 when I said that a huge “perturbation” will come and may not end.
Good People, unless the goal is to bleed Nigeria to ground zero, there is no reason to float the Naira and remove fuel subsidy at the same time, because using basic economics, Nigeria and Naira cannot establish optimal equilibrium within the variables, considering the state of our economy.
Ndubuisi: As I noted 12 months ago that floating Naira will destroy Naira and the economy, Nigeria has to return to the old model because Naira is not matured to be floated as we do not have a lot of economic life jackets to help it in the international currency seas. We can pick N1,000/$ as the official exchange and go with it! If the president makes that speech today, the paralysis will calm down.
The biggest challenge today is not that the Naira is exchanging at N1,500 or N1,400 to US$1, the issue is that the volatility will make it impossible for companies to plan and investors to invest. The exchange rate stresses the traders and speculators, but for investors, volatility kills their plans. So, pegging Naira will deal with that volatility at least for contracts to be worked out in boardrooms.
The second thing is energy cost. Nigeria must bring full subsidy for industrial customers even as it allows commercial and residential to pay the full rates. Understand that if we do no deepen the industrial base, the vicious cycle will continue. So, to tame inflation and help companies make things, we need to assist them on energy costs which have gone up significantly. But do not give them money, use rebates so that only REAL industrial customers will benefit.
“Tolaram will acquire Diageo’s 58.02% shareholding in Guinness Nigeria, and enter into long-term license and royalty agreements for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brands.
“The transaction is expected to be completed during Fiscal 2025, subject to obtaining the requisite regulatory approvals in Nigeria,” Ademola said.
“In partnership with Guinness Nigeria and Tolaram, Diageo will continue to drive the brand and marketing strategy for Guinness in Nigeria, to ensure Diageo’s exceptional capabilities in brand building and innovation continue to drive long-term growth for Guinness in Nigeria.” Guinness parent company, Diageo, wrote to the Nigeria stock exchange.
