HIGHLY COMMENDED WINNER
Best in Class Treasury
Solution in Africa
Nigerian Breweries Plc
Nigeria, West Africa
Sola Ismail, Tax and Treasury Manager
Trade/SCF solution for brewery in Nigeria
Nigerian Breweries Plc, the pioneer and largest brewing company in Nigeria was incorporated and has been in operations
in the country for over 70 years. The company has 19 brands, nine operating breweries, two distribution centres, two
malting plants and several sales depots from which the high-quality products are distributed to all parts of Nigeria.
Nigerian Breweries was faced with some daunting business
challenges arising from the current macro environment.
Specific issues included:
Macroeconomic risk: slow economic growth in 2015 and
recession in 2016 showed evidence that there may be reduced
demand for Nigerian Breweries’ products.
FX/devaluation risk: given that some of its raw materials are
imported, Nigerian Breweries Plc was exposed to naira
devaluation risks that adversely affected its margins.
Increased cost of production from locally sourced materials.
Letters of credit (LC) issuance structures had dried up in the market
as most banks lost LC confirmation lines from correspondent banks.
The outright ban on the use of the CBN FX window for the
importation of some packaging materials forced Nigerian
Breweries to use locally available packaging substitutes. This
temporarily increased the strain on production while also
increasing the local currency payable needs of the company.
Tightening cash flow situation as a result of the fact that Nigerian
Breweries had to continue to place naira with the CBN for FX
purchase requests. This affected the cash flow of many
corporates that had to leave idle cash with the CBN to have
access to FX when available.
In light of the challenges described above, Nigerian Breweries
reached out to banking partners to proffer a bespoke, encompassing
solution to address the challenges associated with foreign
procurement (imports) and local purchases that were threatening to
affect the ability of the company to have products on the shelves as
well as remain profitable.
Nigerian Breweries were concerned about mitigating the effects of the
macro-economic conditions on their working capital. Citi were
eventually selected to provide a solution and working with a multi-
functional team were able to provide an end-to end solution that was
implemented throughout the course of 2016.
Core to this solution was a customised deferred, clean LC issuance
structure. This utilises LC confirmation lines from Citi offshore and
allows Nigerian Breweries to issue LCs without necessarily having FX.
This helped the company better plan its foreign purchases as they
knew the value of LCs they could issue at every point in time.
Also, Citi Nigeria issues confirmed deferred LCs to Nigerian
Breweries’ suppliers and leveraged its correspondent bank
relationships to issue and confirm the LCs.
The second key part of the solution is supply chain finance (SCF).
Nigerian Breweries used Citi’s Supplier Finance Solution across their
broad range of local suppliers. This scheme enabled them to
increase the payment terms of all their suppliers in order to manage
tight cash flows more efficiently.
Best practice and innovation
This multi-faceted project has highlighted numerous instances of best
practice and innovation. Most notably, the level of collaboration
between the Nigerian Breweries’ treasury team and Citi was
Also, Nigerian Breweries developed a methodology to classify raw
materials and spares for allocation of scarce FX. This process helped
ensure the running of the plants, as the company was able to match
the items of import to the deferred LC tenor buckets.
Technology has also been used effectively and Citi’s Supplier Finance
solution is not only innovative but revolutionary in Nigeria, as
traditional supplier finance solutions were manual and offered
quantitative benefits to the vendors but not the buyers.
Improved working capital.
Improved public image from the corporate social
Seamless implementation with no disruptive impact on
the company’s activities.
Geoff Gursel, Citi collects the award on behalf of Nigerian Breweries and Meg Coates20 | treasurytoday Adam Smith Awards © August 2017