- Govt lacks policy direction to grow viable economy – Hon Yusuf
Stock market performance remains shaky, as eight quoted companies recorded a decline of N22.798billion gross profit from N196.838 billion to N174.040 billion in the first half ending June 30, 2018.
The companies are Dangote Flour Mills Plc., Nigeria Breweries Plc., Cadbury Nigeria Plc. and Dangote Sugar Refinery Plc.
Other companies that equally reported a disappointing outlook in their profits are Lafarge African Plc., Okomu Oil Palm Plc. and NASCON Allied Plc.
The Point investigations revealed that Dangote Flour Mills recorded 45 per cent drop in its gross profit from N16 billion in the first half of 2017, to N9 billion in the same period of 2018.
The cost and challenges of doing business in Nigeria are massive, ranging from lack of infrastructural development
Nigeria Breweries gross profit slumped from N82 billion in 2017, to N76 billion during the review period of 2018, while Cadbury Nigeria Plc. reported 6 per cent slide in its gross profit from N3 billion in 2017 to N2 billion in the comparative period of 2018.
For Dangote Sugar Refinery Plc., which, in every standards, is regarded as high profile company, experienced a disappointing outing as the gross profit decreased 13 per cent, from N27 billion to N23 billion in the same period of 2018, while Lafarge African Plc., reported 12 per cent drop in gross profit, from N44 billion in the first half of 2017 to 39 billion at the review period of 2018.
On the other hand, Okomu Oil Palm Plc., and NASCON Allied Plc. both announced a marginal increase of N11 billion in gross profit in 2017 to N11 billion in 2018, and N4 billion to N4 billion in the first half of 2018, respectively.
A thorough observation of the 2018 half year financial statement of some of the selected companies showed a drop in cost of sales and marginal increase in revenue.
Other salient indicators of the results were also not encouraging, as market observers collectively blamed the lackluster performance on macro-economic indicators.
Politics dominate economic focus –analysts
Financial pundits, who spoke with our correspondent attributed the poor performance to the continued focus on politics, which have dissuaded the implementation of meaningful structural reforms that could aid growth of companies.
President, Manufacturers Association of Nigeria, Dr Frank Jacobs, said the lingering lackluster performance of the economy had made it imperative for a rethink on the country’s development strategy.
“The cost and challenges of doing business in Nigeria are massive, ranging from lack of infrastructural development, power and policy summersaults. Due to lack of disposable income in the economy, as a result of the delayed budget, manufacturers have inventories of unsold stock, which is detrimental to the growth of any economy,” Jacobs said.
He, however, advised that the National Assembly should hasten the passage of the 2018 budget, so that it can be implemented and funds pumped into the system for proper use.
Professor of economics and financial analyst, Chiazor Onuoha, said the market has continued its downward trend with some investors remaining on the sidelines, watching developments in the political environment.
He explained that in line with historical trends, investors tend to reduce exposure to risky assets in the year, leading up to general elections, adding that this is similar to the situation in Nigeria.
“The one thing investors detest is ‘uncertainty’ and as such the policy uncertainty, which is usually characteristic of a pre-election year, has continued to weigh on market sentiment.
“Investors will be keeping a keen eye on development in the polity, with regards to either a change or continuation of the current administration and expected policies. As such, this downside risk is expected to worsen as 2019 general elections draw near, ” he said.
President Buhari de-marketed Nigeria – Hon. Yusuf
Chairman, House Committee on Capital Market, Honorable Tajudeen Yusuf, has accused the Muhammadu Buhari-led administration of being responsible for the bad shape the country’s economy.
Yusuf, who was reacting to issues bordering on the economy, while speaking on national television last week, said: “Shortly after the president assumed office in 2015, he went round the globe de-marketing Nigeria as one of the most corrupt nations in the world.
“Foreign portfolio investors left the capital market and the market capitalisation slumped as never before. This is because they lack positive economic direction to grow the economy,” he observed.
Yusuf said there is the need for collaboration and synergy between regulators, investors, operators and other key players in the nation’s capital market to serve as the catalyst for the growth and development of the nation’s economy.
Secretary/Legal adviser to Nigeria Breweries Plc., Mr. Uaboi Agbebaku, said the new excise duty regime and higher rate of excise duty on beer introduced by the Federal Government in June 2018 further impacted negatively on their performance in the period under review.
Vetiva Capital Management Limited said the Nigerian economy did not fare as well as expected in the first half of 2018.
“First quarter growth domestic product grew by 2.0 per cent. Weakness in the services sector was unsurprising, in light of still weak consumer wallets, but the slowdown in agriculture was a real concern, particularly as it may be reflecting the negative impact of escalating violence in the middle belt region,” the company said.
Experts predict uncertainty in second half
Experts have projected that increased political uncertainty generated by pre-election activities, will further constrain the performance of the stock market in the second half of the year.
Analysts at Afrinvest Research said five factors would drive the market in the second half of 2018. He listed the factors as new listings, budget implementation, elections uncertainties, sustained liquidity in forex exchange and corporate earnings.
According to him, the general election uncertainties would make investors to be cautious, while trading in equities.
“In line with historical trend, investors tend to reduce exposure to risky assets in the year leading to general elections, and this is similar to the situation in Nigeria. One thing investors detest is ‘uncertainty’ and, as such, this downside risk is expected to worsen, as 2019 general election draws near, ”he added.
Other market observers warned that for the projected economic growth envisioned by the federal government to be realised, it is imperative to get the capital market back to its desirable
heights.
Analyst at Capital Bancorp Plc., Mr. Victor Chiazor, said: “The market has so far not been as impressive as most analysts would have expected it to be, given the momentum the market witnessed at the early part of the year, especially with major economic Indicators supporting growth expectations.”
He explained that the Nigerian stock market lost a total of N320 billion, following weak demand by investors, who are adopting cautious
trading.
“The stock market, which ended 2017 as the third best performer, had sustained that uptrend in the beginning of 2018. But profit-taking that followed, thereafter, paired the gains and made the market to close the first half of the year with a marginal growth of 0.09 per cent,” he
stated.
He noted that the factors that fueled the persistent bear run, since the second quarter of the year have continued, leading to a decline of N320 billion in the market capitalisation in the first two weeks.
