Nigeria’s Forex reset in mid-2023 turned importation into a daily pricing war for FMCGs, especially those that depend on FX to pay suppliers. To compete, Nestlé Nigeria had to turn to local sourcing.
In this article, we explore why that shift was necessary, how Nestle Nigeria approached it, and the lessons it offers for other African supply chains facing the same issue.
Key Nuggets:
- Nigeria’s FX crisis multiplied finance costs and losses, so naturally, Nestle Nigeria’s management needed fewer dollar purchases and liabilities as quickly as possible.
- The company pushed for local substitution of raw materials supplied by Nigerian businesses. Cassava starch was the flagship move
- Nestlé used an anchor-buyer approach: offtake commitments, technical help, audits, and support that helped suppliers scale and meet standards
- Local sourcing cut exposure to FX swings, shortened lead times, and helped support a profit return in Q1 2025
- The big lesson for African supply chains is to treat local supply as a build project, not a vendor switch, with quality as the hard gate
Why Local Sourcing Became Urgent For Nestle Nigeria
On June 14, 2023, Nigeria unified its exchange rates, and the Naira dropped sharply on the official market.
The FX shock that followed hit hardest in sectors with heavily forex-dependent supply chains. Unfortunately, the FMCG industry was among the most affected, as it relied heavily on imports.
Overnight, buying raw materials in dollars and selling the finished goods in Naira became a liability. Especially considering the fact that the dollar kept rising against the Naira at the time.
For Nestle Nigeria, 2023 numbers were strong across revenue and operating profit. But then the financial cost dwarfed the operating profit.
At the end of the fiscal year, FX losses amounted to about N195.1 billion (about $200 million), resulting in a net loss of about N79.5 billion (about $75 million). In 2024, revenue broke records, but the FX problem had not gone away, and the company made another heavy loss.
By now, the forex crisis was a full-blown financial pandemic across the country that had many
multinationals scaling back or exiting local production when FX access and profit repatriation failed.
However, Nestlé Nigeria had one advantage. The company had already spent decades building backward integration with farmers in Nigeria. And it was time to lean on it.
Basically, Nestlé Nigeria has been building and investing in local supply chains long before the 2023 FX reset. That included an Agricultural Services Department and early production linked to sorghum for MILO.
By 2018, the company reported sourcing about 80% of its agricultural inputs locally and more than 90% of its packaging materials locally. This base was critical as FX punished the remaining imported slice.
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The Flagship Move: Nestle Nigeria Cassava Starch Sourcing
Nestlé’s most visible local substitution project was the switch from imported corn starch to locally sourced cassava starch.
Prior to that, corn starch had been imported from outside Nigeria, which meant every purchase pulled on scarce FX and carried a shipping lead time that exposed the supply chain.
Although at the time, cassava was offered on a national scale, an industrial-starch supply at the required quality was not yet mature. Nestlé addressed that maturity gap by working with multiple local suppliers and investing in their ability to produce food-grade starch.
The company provided suppliers with letters of intent for offtake, technical support for processes and standards, audits, and advance payments that eased working capital constraints.
One supplier, Psaltry International, described how Nestlé sampled early production and became the company’s first customer immediately production started. It was a relationship based on trust.
The operational upside of cassava starch was straightforward. Domestic supply shortened replenishment time, reduced shipping and port delays, and reduced the need for FX purchases.
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Expanding the Local Sourcing Footprint Beyond Starch
Nestlé broadened local sourcing beyond cassava starch to include spices, grains, oils, and packaging. For example, the company accelerated localized sourcing of turmeric for MAGGI and onion powder in Nigeria and Senegal.
For grains and legumes, Nestlé built on its Cereal Plan and farmer network, including cereals used in Golden Morn and sorghum used in MILO. Palm oil and cocoa inputs were also sourced domestically.
Packaging remained heavily local, which was crucial as packaging imports can quietly drain FX at scale.
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Quality Gates That Made Local Sourcing Workable
Localization works only when quality remains intact, especially because a food brand cannot trade safety for FX relief.
In Nestlé Nigeria’s case, the company invested in quality standards and infrastructure to ensure local inputs met global benchmarks. For instance, suppliers had to implement strict systems, such as food safety management and traceability that links raw materials back to their origin.
This is where many local sourcing programs fail. Teams sign a local contract, discover variation across batches, production fights with QC, and then the plant returns to imports.
Nestlé avoided the same risk by pairing sourcing with supplier audits, testing, corrective actions, and support that raised supplier capability over time, with discipline.
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Impact of Nestlé Nigeria Local Sourcing Shift
Local sourcing reduced a large share of Nestlé’s dollar purchasing needs, thereby reducing the supply chain’s exposure to FX shocks.
By Q1 of 2025, the company had reached a clear turning point, posting a profit after tax of N30.2 billion, following a huge loss of N142.7 billion in Q1 2024. Within the same period, the company also showed operating margin expansion and a sharp drop in net finance costs.
Operationally, local sourcing improved lead times and responsiveness because domestic suppliers can replenish in days rather than wait for international shipping cycles, which enabled greater supply chain agility.
Economically, the local network supported farmer incomes in programs such as dairy and grain efforts tied to collection, training, and better handling, with income.
Strategically, the company stayed present while others left, which helped it capture more market share.
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Supply Chain Lessons From Nestlé Nigeria Local Sourcing Shift
Local sourcing is a great supply chain strategy, but many supply chains have tried it with less success than Nestlé Nigeria. Here are key lessons that made Nestlé Nigeria enjoy success with local sourcing:
1. Start With Substitutions That Fit Local Agronomy
Cassava worked because Nigeria already produces cassava at a national scale, and processors could be developed to meet food-grade needs.
However, Nestlé did not have the same experience with wheat. And that is because Nigeria’s production is far below demand, which keeps imports in the mix.
2. Build Suppliers, Then Lock Demand
Supplier development needs off-take certainty because processors need loans, equipment, and working capital. So, don’t just find a local processor, build one, then guarantee the purchase.
3. Quality is a Non-Negotiable
If you relax standards to meet a local content target, you can end up with recalls, scrap, and lost consumer trust. To avoid that, keep the gate closed until the supplier can pass audits and testing again and again.
4. Think in Supply Networks
Nestlé worked with many farmers and multiple suppliers, spreading risk across geographies and reducing single-failure exposure through redundancy.
Obinabo Tochukwu Tabansi is a supply chain digital writer (Content writer & Ghostwriter) helping professionals and business owners across Africa learn from real-world supply chain wins and setbacks and apply proven strategies to their own operations. He also crafts social content for logistics and supply chain companies, turning their solutions and insights into engaging posts that drive visibility and trust.
