Nestlé Nigeria saved $20 million in foreign exchange in 2023 after replacing imported maize starch with cassava starch purchased from local suppliers in Oyo State, highlighting the financial benefits Nigerian manufacturers can gain from sourcing production materials domestically.
The move reduced the company’s need for foreign currency to purchase the imported ingredient at a time when naira depreciation, foreign exchange shortages and rising production costs were putting pressure on businesses.
Brandspur Brand News reports that the initiative forms part of Nestlé Nigeria’s wider effort to increase the use of locally sourced agricultural materials, with domestic inputs accounting for 80 per cent of its raw materials in 2023, compared with 65 per cent in 2018.
The figures, contained in the company’s 2023 Creating Shared Value Report, point to a gradual shift towards Nigerian suppliers. However, the increased local content does not mean Nestlé has completely stopped importing production materials.
The cassava substitution is particularly significant for manufacturers that depend on imported ingredients. Paying international suppliers exposes businesses to exchange rate movements, foreign currency availability and additional expenses such as shipping. Using suitable domestic alternatives can reduce some of these pressures while creating a market for local agricultural producers.
The economic environment made the decision especially relevant. Nigeria’s headline inflation reached 33.95 per cent in May 2024, while food inflation stood at 40.66 per cent, according to the National Bureau of Statistics. Rising prices placed additional pressure on both manufacturers and consumers.
Nestlé Nigeria’s operating performance during the period also showed the complexity of doing business under such conditions. The company generated approximately N547.1 billion in revenue and N123.8 billion in operating profit in 2023 but ended the year with a loss after tax of about N79.5 billion.
Currency devaluation and the revaluation of foreign currency obligations contributed to the pressure on its bottom line.
At a briefing in Lagos on March 1, 2024, the company’s Chief Executive Officer, Wassim Elhusseini, disclosed that its factories operated at approximately 95 per cent capacity in 2023 despite the difficult foreign exchange environment.
However, the reported $20 million sourcing benefit should not be mistaken for additional profit. It represents foreign exchange saved through the substitution of imported maize starch, and the company has not provided a detailed breakdown of the calculation or the quantity of starch replaced in the information available.
Nestlé’s subsequent financial results further illustrate the distinction between operational growth and overall profitability. Revenue increased to approximately N958.8 billion in 2024, while operating profit reached N167.9 billion. Despite these improvements, the company still recorded a substantial loss after tax amid financing and currency-related pressures.
The company also disclosed that it repaid $20 million in inter-company foreign exchange debt in 2025. Although this amount is identical to the foreign exchange savings reported from cassava sourcing, there is no established evidence linking the two transactions.
Beyond its financial implications, the sourcing strategy creates opportunities for domestic agricultural suppliers by connecting local production to the needs of a major consumer goods manufacturer.
Nestlé has also reported that all the maize and soya used in its ready-to-eat cereal production were locally sourced. Its agricultural initiatives include training and support for farmers involved in domestic supply chains.
For Nigeria, where manufacturers frequently contend with foreign exchange constraints and imported production costs, the development highlights the potential of stronger relationships between local farmers and large-scale businesses.
However, the long-term benefits will depend on whether domestic suppliers can consistently meet manufacturers’ requirements for quality, pricing and production volumes. Reliable transportation, processing infrastructure and access to financing will also remain important.
Nestlé Nigeria’s experience provides an example of how replacing selected imported materials with locally available alternatives can reduce foreign exchange expenditure, while strengthening connections between manufacturing and domestic agriculture.
