According to data tracked by BrandIconImage, Nigerian equities increased by a whopping N18.2 trillion in capitalization to stand at N59.12 trillion at the end of March 2024.
Despite the harsh operation environment that dampened the production capacity of many businesses, some of Nigeria’s leading conglomerates and manufacturers made record revenue in the financial reports
Data compiled from the firms’ latest
financial statements show that the combined after-tax profit of NASCON Allied
Industries Plc, Unilever Nigeria Plc, BUA Foods Plc and Dangote Cement Plc
increased to N589.4 billion from N483.6 billion in 2022.
“These firms have more local production and BUA Foods and
Dangote Cement significantly jacked up their prices,” Oluebube Nwosu, consumer
goods analyst at Vetiva Capital, said.
He said by producing locally, the companies were able to
reduce exposure to foreign exchange.
“It depends on how these manufacturers can do their product
mix, like products they can increase the price on and have minimal volume
decline and also products they can minimise FX input on,” Nwosu added.
Bolade Agboola, an energy and consumer growth analyst at
Chapel Hill Denham, said some of the companies were able to remain profitable
as a result of strategies put in place.
“They also don’t have the same level of exposure to FX
volatility. These strategies include revenue growth strategy and for Dangote
Cement, they also have operations outside Nigeria which they could use to hedge
their exposure,” she added.
Many firms, however, took a beating from the economic
challenges. Cadbury, Nigerian Breweries, Nestle, International Breweries, and
Dangote Sugar posted a combined after-tax loss of N346.7 billion last year.
In 2022, Cadbury, Nigerian Breweries, Nestle, and Dangote
Sugar had an after-tax profit of N117.4 billion while International Breweries
posted a loss of N21.6 billion.
BUA Cement recorded a profit of N69.45 billion, down from
N101.0 billion. Lafarge Cement’s profit fell to N51.1 billion from N53.7
billion.
Since President Bola Tinubu announced petrol subsidy removal
during his inauguration on May 29, pump prices have more than tripled to over
N600, while the value of the naira has plunged following the floating of the
currency.
Last June, the Central Bank of Nigeria merged all segments
of the FX market into the Investors and Exporters window and reintroduced the
willing buyer, willing seller model.
The naira has depreciated significantly against the dollar
and other major foreign currencies since then.
The official exchange rate fell from N463.38/$ to N1382.9/$
as of March 26, 2024. At the parallel market, the naira is N1,350/$ from 762/$.
Rising inflationary pressures in recent months have weakened
the purchasing power of cash-strapped consumers, even as businesses grapple
with higher operating costs.
Data from the National Bureau of Statistics shows that
Nigeria’s headline inflation rate rose for the 14th consecutive time in
February to 31.70 percent from 29.90 percent in the previous month.
Food inflation, which constitutes 50 percent of the
inflation rate, rose to 37.91 percent from 35.41 percent.
Nigeria’s rising inflation has forced many small businesses
to close shop, worsening the country’s unemployment situation. Its unemployment
rate rose for the second straight quarter to 5.0 percent in the third quarter
of last year from 4.2 percent in the previous quarter.
The reported recently that 11 consumer firms sold
fewer goods on credit last year compared to 2022 as the rising inflationary
pressures impacted their financial performance.
The latest financial statements of the firms show that the
total trade and other receivables increased by 40 percent to N843.8 billion
from N602.5 billion. The growth is lower than the 74.2 percent increase
recorded in 2022.
“No manufacturer wants to sell goods on credit again because
the worth of collecting money back after it has been sold on credit won’t be
the same as a result of inflation which will have reduced the value of the
money,” Femi Egbesola, national president of the Association of Small Business
Owners of Nigeria, said.
He said the raw materials cost may have increased when the
debtors eventually pay for the goods bought on credit.
“More companies have dropped down on credit sales. In the
same vein, the Micro, Small, and Medium Enterprises in their value chain
supplying these companies do not collect local purchase orders again but will
rather supply and get paid,” Egbesola said.
He added that in the past, most supplies were based on stipulating 30 days, 60 days, or 90 days payments. “No one is doing it in this system because prices are not stable and they can’t project and plan with the type of inflation we have at the moment.”