The brewing industry in Nigeria is facing tough times. Costs for essential local raw materials like sorghum and wheat have skyrocketed due to inflation, security issues, and other economic challenges.

This spike in costs is threatening the breweries’ strategy of using local materials to cut costs, which was initially aimed at avoiding the high expenses of importing due to unstable exchange rates.

Rising Costs and Import Challenges

In just the first quarter of 2024, the cost of local raw materials in major breweries jumped by 113.6%, reaching N188.0 billion, up from N88.0 billion the previous year.

This increase shows no signs of slowing down, and it might force many breweries to start importing raw materials again, despite the high costs involved. This change could set back efforts to boost Nigeria’s industrial growth and job creation.

Financial Challenges and Company Strategies

To handle these rising costs, leading breweries have had to increase their borrowing, with total debts hitting N812.7 billion in the early part of the year. This borrowing has led to a significant rise in finance costs by 191.2%, adding more financial pressure on these companies.

Additionally, with other economic pressures like rising inflation, falling purchasing power, the depreciating naira, and increasing costs for essentials like petrol and electricity, breweries have been forced to raise their product prices multiple times, risking a decrease in consumer demand.

In response to these tough conditions, Nigerian Breweries, for example, has announced a strategic reorganisation that includes suspending operations at two of its nine breweries.

This decision is part of a broader effort to cut costs and stabilise the business but comes with significant impacts on employees and local communities.

Overall, Nigeria’s brewing industry is struggling to navigate a sea of economic challenges, trying to stay viable and support its workforce and communities amidst these difficulties.