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Nestle to Invest $1.4bn to Boost Cocoa Production, Farmers’ Income, Lessen Child Labour

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Top chocolate producer, Nestlé has revealed plans to continue expanding its cocoa sustainability efforts, through investing a combined $1.41 billion by 2030.

The investment, which is thrice Nestlé’s current annual investment, is part of an innovative income accelerator program, which aims to improve the livelihoods of cocoa farming families in West Africa.

According to the Swiss international food and drink processing firm, the program covers cash incentives for farming families to reduce the level of high child labour, especially in cocoa-growing nations like Ivory Coast, Ghana, etc.

The University of Chicago, in a recent study, disclosed that about 45% of children in agricultural households in Ivory Coast and Ghana cocoa farming areas were engaged in child labor.

Recently, chocolate-producing companies have come under pressure by the United Nations International Children’s Emergency Fund and other global organisations to invest in cocoa-farming communities facing dire challenges, including widespread rural poverty, lack of access to financial services and basic infrastructures like water, health care, and education. These are factors that increase child labour as children support their families in cocoa production.

Nestlé’s cash incentives will be paid directly to cocoa-farming households for certain activities such as enrollment of children in school, the company stated.

The company’s CEO, Mark Schneider during a webcast on Thursday said, “Nestle’s new initiative focuses on the root causes for child labour and the living income gap farmers and their families face… Our goal is to have an additional tangible, positive impact on a growing number of cocoa-farming families, especially in areas where poverty is widespread and resources are scarce, and to help close the living income gap they face over time.

“Building on our longstanding efforts to source cocoa sustainably, we will continue to help children go to school, empower women, improve farming methods and facilitate financial resources. We believe that, together with governments, NGOs, and others in the cocoa industry, we can help improve the lives of cocoa farming families and give children the chance to learn and grow in the safe and healthy environment they deserve.”

The KitKat Chocolate and Smarties confectionery producer stated that the Accelerator Program will aid the company to transform its global sourcing of cocoa through a fully traceable, directly sourced supply chain by 2025.

In 2021, 51% of the cocoa Nestlé used was directly sourced and traceable, versus 46% in 2020. By 2025, the company expressed that it fully wants to trace 100% of its cocoa back to specific farms under its in-house sustainability scheme, the Nestle Cocoa Plan.

“We’re very confident this will be a game changer on the road to reducing the risk of child labour,” Nestlé Head of Operations, Magdi Batato said in an interview with Reuters.

To qualify for the payments from Nestle, farmers must send their children to school, prune cocoa trees, plant shade trees and diversify their income with other crops or livestock.

Then each farmer, irrespective of the tonnes of cocoa produced by them, will directly receive cash payments via mobile transfer of up to 500 Swiss francs ($543) a year.

This, according to Batato represented 20-25% of a farmer’s average annual income. The incentive will then be levelled at 250 francs after two years and progressively extended to all of Nestle’s 160,000 cocoa farmers by 2030.

In an interview, Nestlé Head of Confectionery, Alexander von Maillot said, “An incentive to the household is much more inclusive of the smaller farmers, really making sure that nobody gets left out.”

To ensure that children really are attending school and farmers are following the rules, Nestlé disclosed that The Sustainable Trade Initiative will monitor the programme with other third parties. It also explained that children helping on family farms outside of school time do not fall under the International Labour Organization’s description of child labour.

 

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Dangote Refinery Raises Diesel Price to N1,100/Litre Due to Naira-Dollar Crash

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Dangote Refinery has announced an increase in the price of Automotive Gas Oil (diesel) from N940 per litre to N1,100 per litre.

This significant adjustment in pricing reflects the refinery’s efforts to mitigate the impact of currency depreciation on its operations.

The decision to raise the price of diesel comes amidst ongoing challenges in the foreign exchange market, with the naira experiencing a downward spiral against the dollar in recent weeks.

The refinery cited the unfavorable exchange rate as the primary driver behind the price hike, signaling the intricacies of operating in a volatile economic environment.

It is worth noting that just a few weeks ago, on April 24, 2024, Dangote Refinery had announced a reduction in the prices of diesel and aviation fuel to N940 per litre and N980 per litre, respectively.

This move was aimed at responding to calls from oil marketers for a reduction in diesel prices, demonstrating the refinery’s willingness to adapt to market dynamics.

However, the recent depreciation of the naira has necessitated a reversal of this downward trend, prompting Dangote Refinery to adjust its pricing strategy accordingly.

Some dealers reported purchasing diesel from the plant at even higher rates, reaching up to N1,200 per litre for those procuring lesser volumes.

Abubakar Maigandi, the National President of the Independent Petroleum Marketers Association of Nigeria, attributed the price increase to the rising exchange rate, as communicated by the refinery.

He emphasized the direct correlation between currency fluctuations and the cost of imported commodities, such as crude oil, which forms the basis for diesel production.

While officials of the refinery have remained tight-lipped on the matter, industry sources and major marketers have corroborated reports of the price adjustment.

Chief Ukadike Chinedu, the National Public Relations Officer of IPMAN, echoed similar sentiments, highlighting the adverse impact of the naira’s depreciation on refined product prices.

The recent fluctuations in the naira-dollar exchange rate underscore the challenges facing Nigeria’s economy, with implications for various sectors, including energy and transportation.

Despite initial signs of stability earlier in the year, the naira’s recent depreciation has reignited concerns about inflationary pressures and economic uncertainty.

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NNPC E&P Ltd and NOSL Begin Oil Production at OML 13, Akwa Ibom State

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NNPC Exploration and Production Limited (NNPC E&P Ltd) and Natural Oilfield Services Limited (NOSL) have commenced oil production at Oil Mining Lease 13 (OML 13) located in Akwa Ibom State.

The announcement came through a statement signed by Olufemi Soneye, the spokesperson of NNPC E&P Ltd, highlighting the collaborative effort between the flagship upstream subsidiary of the Nigerian National Petroleum Corporation (NNPC) and NOSL, a subsidiary of Sterling Oil Exploration & Energy Production Company Limited.

The production, which officially began on May 6, 2024, saw an initial output of 6,000 barrels of oil. The partners aim to ramp up production to 40,000 barrels per day by May 27, 2024, reflecting their commitment to enhancing Nigeria’s crude oil production capacity.

Soneye said the first oil flow from OML 13 shows the dedication of NNPC E&P Ltd and NOSL to drive growth and development in Nigeria’s oil and gas sector.

He stated, “The achievement does not only signify the culmination of rigorous planning and execution by the teams involved but also represents a new era of economic empowerment and development opportunities for the host communities.”

For Nigeria, the commencement of oil production at OML 13 holds immense significance. It contributes to the country’s efforts to increase its oil production capacity, essential for meeting domestic energy needs and driving economic growth.

Moreover, Soneye reiterated NNPC E&P Ltd and NOSL’s commitment to operating in a safe, environmentally responsible, and community-beneficial manner.

This partnership underscores their dedication to sustainable practices and fostering positive impacts in the local communities where they operate.

The commencement of oil production at OML 13 marks a pivotal moment in Nigeria’s oil and gas industry, signifying not only increased production capacity but also the collaborative efforts between industry players to drive growth and development in the nation’s vital energy sector.

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Manufacturers Grapple with Losses Amid Economic Strain

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In the first three months of 2024, some of Nigeria’s major manufacturers found themselves navigating treacherous waters as financial losses mounted amidst economic turbulence.

According to data compiled by BusinessDay, rising interest rates and a further devaluation of the naira contributed to the woes of these industrial giants.

The latest financial reports from 13 listed consumer goods firms paint a grim picture, with seven of them collectively recording a staggering loss of N388.6 billion in Q1.

Names such as International Breweries Plc, Cadbury Nigeria Plc, and Nigerian Breweries Plc were among those that bore the brunt of the downturn.

On the flip side, a few companies managed to buck the trend. BUA Foods Plc, Unilever Nigeria Plc, and Dangote Cement Plc reported a combined profit of N171.9 billion, showcasing resilience amidst the challenging economic landscape.

While the overall revenue of these manufacturers saw an impressive 79 percent increase to N2.27 trillion, it was overshadowed by soaring financing costs.

In Q1 alone, finance costs skyrocketed to N616.5 billion from N65.8 billion in the same period in 2023.

Analysts attribute these mounting losses to the confluence of factors, including the devaluation of the naira and escalating interest rates. With the naira experiencing nearly a 30 percent devaluation this year alone, coupled with a 40 percent devaluation last June, companies faced intensified pressure on their margins.

Moreover, the Central Bank of Nigeria’s decision to raise the monetary policy rate to 24.75 percent in March further exacerbated the situation.

This marked the second consecutive increase, following a 400 basis points hike in February, aimed at curbing inflation.

The adverse effects of these economic headwinds were felt across various sectors. Nestle reported the highest finance cost of N218.8 billion, followed closely by Dangote Cement and Dangote Sugar Refinery.

Commenting on the challenging business environment, Uaboi Agbebaku, the company secretary at Nigerian Breweries, highlighted how increased interest rates and FX volatility led to a staggering 391 percent rise in net losses compared to the same quarter in 2023.

Looking ahead, manufacturers remain cautiously optimistic but vigilant. Thabo Mabe, managing director at NASCON, emphasized the importance of navigating the turbulent waters while executing robust strategies to ensure sustained growth.

As Nigeria grapples with economic uncertainties, the resilience of its manufacturing sector will play a pivotal role in shaping the nation’s economic trajectory.

However, concerted efforts from both the public and private sectors will be needed to steer the industry towards stability and growth.

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