Brewer gets Diageo loan to help with currency shortages

September 21, 2016 1:04 PM

Nigeria is in recession due to a slump in oil prices, which has hurt its currency and government revenues.

A pint of Guinness beer is seen outside a pub in London, file.

Guinness Nigeria said on Wednesday that it had received a $95 million loan from parent Diageo to help it cope with dollar shortages in the West African country caused by a slump in crude prices.

Chief finance officer Ronald Plumridge said the company's currency needs were much bigger than it was able to source locally and from its exports and so Diageo had stepped in with the loan.

The loan was priced at 3-month Libor plus 4.75 percent, he said.

In June, the central bank floated the naira to try to resolve the dollar shortage and to preserve its dwindling foreign reserves. The naira lost a third of its value after the float.

"Longer term we intend to source raw materials locally," Plumridge told an analysts' call. "The mix of the business, FX impact and inflation, put pressure on the growth."

Guinness Nigeria on Tuesday recorded a pretax loss of 2.35 billion naira for 2016, its first loss in 30-years, hit by declining sales, dollar shortages and domestic inflation running at 11-year high of 17.6 percent.

It said it would cut its total dividend to 0.50 naira for 2016 from 3.20 naira a year ago and also cut 310 staff in the last quarter of the year, the CFO said.

Guinness plans to start local production of spirits half way through 2017 and to cut costs to revive profits, the company said.