- Absence of economic blueprint erodes profits — Analyst
By Ngozi Amuche
The Nigerian business community is groaning over the state of the nation’s economy, as major blue chip companies like Dangote Flourmills and five others suffer N393.695 million revenue loss in the first quarter of 2019.
This was against the N540.203 million which was recorded in the same period of 2018.
The Point’s findings revealed some of these companies to include: Tantalizers Plc, Interlink Technologies Plc, Dangote Flourmills Plc, MRS Oil Plc, May & Baker Plc and Rak Unity Petroleum Plc.
A close look at the quoted firms’ Q1 2019 financial statements, which were presented to the Nigerian Stock Exchange showed that Tantalizers led the group with -23.14 per cent revenue loss to N307, 715 million, from N400, 353 million in the review period of 2018. Interlink Technologies Plc, followed with -39 per cent decline in revenue to N45, 971 million, from N75, 439 million last year.
Dangote Flourmills Plc recorded -13.40 per cent drop in revenue, to N22, 956 million, from N26, 509 million at the comparable period of 2018. MRS Oil Plc reported -59.73 per cent revenue loss to N13, 510 million, from N33, 550 million in the same period of 2018.
Other companies that equally reported disappointing outings in their profits are May & Baker, 14.3 per cent to N1,869million, from N2,182 million; and Rak Unity Petroleum Plc, -22.8 per cent revenue drop to N1,674 million, from N2,170 million in that order.
Experts blame absence of economic blueprint
Market pundits who spoke with our correspondent said the cost and challenges of doing business in Nigeria are massive, ranging from lack of infrastructural development to policy inconsistency.
A professor of economics and financial observer, Prof. Felix Chidobem, said, “Dangote Flourmills which, in every standard, are regarded as a high profile company had experienced a disappointing outing, as the revenue slumped. However, observation of the Q1 2019 financial results of some other companies, like SCAO Nigeria Plc, Japaul Oil Plc, also showed a drop in their net assets.”
Other salient indicators of the results were also not encouraging, as market observers collectively blamed the lackluster performance on macro-economic indicators.
A capital market commentator and stockbroker, Mr. Ademola Shittu, said the main driver of economic growth had suffered tremendous neglect, since the advent of the President Muhammadu Buhari administration on May 29, 2015.
“Apart from the administration’s obvious sidetracking of the business community in economic and business matters, many of its policies have impacted negatively on the sector,” he said.
Shittu also blamed the late formation of a cabinet as well as the peculiar late passage of budgets on the part of the government as an anathema to economic growth.
He explained that Nigeria’s Economic Recovery and Growth Plan 2017-2020, aimed at achieving macroeconomic stability and economic diversification, was urgently needed to accelerate its implementation and progress. “Nigeria’s emergence from recession remains very slow as sectoral growth patterns have also remained unstable,” he maintained.
He added that the challenges confronting Nigeria called for proactive and strategic responses, which must be supported by every responsible stakeholder of the Nigerian economy.
The Director-General of the Lagos Chambers of Commerce and Industry (LCCI), Dr. Muda Yusuf, blamed some of the problems the nation is going through on the current administration’s slow start in building the economy. According to Yusuf, absence of an economic blueprint was one of the concerns of the private sector in the early days of the administration.
Specifically he said, “The manufacturing sector experienced some major challenges during the past three years of the current administration. The factors were both external and domestic. The main external factor was the collapse of oil price, which affected forex availability and triggered sharp exchange rate depreciation. There was very little the government could do to stem that.”
The LCCI boss also noted that the policy component of the problem resulted largely from lack of support and foreign exchange policy choices which aggravated the problem of forex liquidity. The restriction of 41 items from access to interbank forex market added to the plight of some manufacturing firms.
“The high interest rate and unfair competition from imported products were general factors that constrained the growth of the industrial sector. High energy cost continued to impede the competitiveness of the sector. Capacity utilisation was between 40 – 45 per cent over these periods,” he stated.
“The good news is that segments of the manufacturing sector that had substantial backward integration capabilities had a very good leverage during the review period. Such firms became more competitive and more sustainable and profitable. They are largely in the food and beverage categories,” Yusuf said.
While economists and other experts blamed poor performance of companies to financial indicators and macroeconomic challenges, others attributed the poor performance to continued focus on politics, which have dissuaded the implementation of meaningful structural reforms that could aid growth of companies.
An Assets Management Director, Mr. Ibukun Adedipe, however, advised that the National Assembly should always hasten the passage of annual budgets, so that they can easily be implemented for
proper use.
He noted that the market had continued on its downward trend with some investors remaining on the sidelines, watching developments in the political environment, adding that investors tend to reduce exposure to risky assets, especially during the electioneering year, as many investors detest ‘uncertainty’ and policy inconsistencies.
“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.
He said there was 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.
