Naira shortage forces Heineken’s February sales to 15-year low

Heineken NV, world’s second largest brewer, says it had its worst February in 15 years resulting from a biting cash crunch in Nigeria.

Since December 2022, the Central Bank of Nigeria began replacing old 200, 500 and 1,000 naira notes with new ones and in the process mopped out up to N2.1 trillion ($4.6 billion) of cash from the economy. This has triggered a punishing cash scarcity that has intensified in recent weeks and is hurting economic projections by the day.

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Hans Essaadi, Chief Executive Officer of Nigerian Breweries Plc – Heineken’s local unit, says the company depends on cash for about 80% of its retail sales, according to a Bloomberg report.

“Sales have been hit this quarter, “not because people don’t have the appetite to consume, but because there’s no money. For the average man on the street, it’s a disaster,” Essaadi said.

To ease the impact on sales, Nigerian Breweries plans to help some of its registered outlets to procure point-of-sale (POS) devices to encourage electronic payments, he said.

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A Supreme Court ruling on March 3, effecting the validity of the old notes till end of the year, has failed to assuage the situation as citizens remain in vain on long queues for hours to withdraw cash.

Nigeria Breweries Plc has been operating in Nigeria since 1946 and commands an expansive network of distributors and up to 800,000 outlets to sell its brands including Star Lager Beer, Legend Extra Stout and Maltina malt drink.

In 2022, revenue at Africa’s second-largest brewery by sales increased 26% extending its recovery from a Covid 19-induced slump. With the cash scarcity in Nigeria, the company’s sales along with others in the sector may be hurting as consumers’ power to purchase is limited.

Also, rising inflation rate at about 22% in Nigeria may be impacting the 14% increase in sales forecast for 2023 and jacking up production cost, Essaadi was quoted as saying.

“We believe that with the demographics of this country, being the biggest economy in Africa, business will come back,” when the cash situation normalizes, he said.