Many Nigerian businesses, from brewers to drug manufacturers, saw a decline in their first-quarter earnings as a result of the cash crisis and worries about the elections, which slowed down economic activity.
The cash shortages brought on by the central bank’s naira redesign strategy were compounded by the scarcity of petrol, high inflation, and rising interest rates throughout the year’s first three months.
According to the Stanbic IBTC Bank Purchasing Managers’ Index, the country’s private-sector activity contracted in February for the first time since June 2020 as output and new orders plummeted along with the sharp decrease in consumer expenditure (PMI). The PMI, which gauges the health of the private sector, dropped from 53.5 in January to 44.7 in February. To 42.3 in March, it fell even more.
Many businesses from various economic sectors recorded lower-than-expected sales for the first quarter, which caused some to declare reduced earnings while forcing others to post losses.
Data gathered by BusinessDay from the unaudited financial records of Dangote Cement Plc and five other publicly traded firms show that they saw a total sales decrease of N69.03 billion over the period.
The largest cement manufacturer in Africa said that its operations in Nigeria sold 3.6 million tonnes (Mt) of cement, a decrease of 24.6 per cent from the same time the previous year.
According to the report, key private and public infrastructure investments have slowed down due to the country’s cash shortage and unfavourable reactions to the general elections.
The lack of cash “affected the daily paychecks of construction workers and shops’ capacity to accept cash payments for cement,” the company claimed. Due to the period’s uncertainty, revenue for Nigerian operations fell by 12.9% to N280.3 billion.
Despite a 1.6 per cent decline in group revenue to N406.7 billion and a 6.1 per cent decline in profit before tax to N146.82 billion, Dangote Cement’s net profit increased by 3.4 per cent N109.5 billion.
In the first quarter, UAC of Nigeria Plc (UACN), which engages in the food and beverage, real estate, paint, and logistics industries, reported an 11% decline in sales to N24.6 billion. Compared to a profit before tax of N979 million during the same period the previous year, it reported a loss before tax of N937 million.
Sales volumes decreased across all market sectors, it was reported, with the exception of quick service restaurants, whose sales rose thanks to a rise in corporate outlets in Lagos and Abuja.
The performance of the company in the quarter would have been better, according to Fola Aiyesimoju, group managing director of UACN, except for difficult macroeconomic and geopolitical obstacles.
“Cash constraints and lost business days due to elections were factors that significantly impacted performance,” he added.
In the first quarter of 2023, Nigerian Breweries Plc recorded a loss before taxes of N17.44 billion, down from a profit before taxes of N20.76 billion in the corresponding quarter of the previous year. Revenue also decreased from N137.77 billion to N123.31 billion.
According to Uaboi Agbebaku, its company secretary, “the effect of the cash constraint, which almost caused the collapse of payment channels, as well as the security and safety worries linked with the general elections, generated disruptions in the economy.”
He said that compared to the same period in 2022, the market for all brewed products had a double-digit (mid-twenties) volume loss. We significantly reduced the impact of the volume drop on our revenue thanks to our sensible pricing approach.
Revenue for Notore Chemical Industries Plc, a manufacturer of fertilisers and other products for enhancing soil and water fertility, fell by 75% to N4.10 billion. The company’s loss increased from N1.55 billion in profit during the same time last year to N7.93 billion this year.
GSK Consumer Nigeria Plc, which produces, markets, and distributes pharmaceutical and consumer healthcare products, had revenue of N4.02 billion in Q1 2023, a decrease from N7.36 billion in Q1 2022. From N285.83 million to N230.19 million, its profit before tax decreased.
An interstate transport business, ABC Transport Plc, reported a fall in revenue of 22.46 per cent to N1.45 billion. Its loss before tax increased from N6.11 million in Q1 2022 to N80.68 million.
The lack of cash “impacted our customers’ ability to recharge through physical airtime vouchers (affecting mostly customers who did not have access to digital recharge channels) and over-the-counter transactions within our MoMo agent network,” according to Karl Toriola of MTN Nigeria Communications Plc.
Also see: Cash availability does not reduce inflationary pressures – KPMG
According to the corporation, this led to a switch to digital recharging systems, which lessened the effects of a cash shortage.
Even though its earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 17.7% to N302.7 billion, its EBITDA margin fell by 1.3 percentage points to 53.3 per cent. Compared to a growth of 31.3 per cent in Q1 2022, profit before tax increased by 8.5 per cent to N155.8 billion.
The country’s economic development is anticipated to slow down in the first three months of the year as the effects of the cash shortage spread across industries.
Yemi Kale, the nation’s former statistician-general and current senior economist at KPMG Nigeria, predicted that difficulties obtaining cash would cause Q1 nominal GDP to decline by between N10 and 15 trillion in mid-March.
“This is because around 40% of Nigeria’s N198 trillion (2022) GDP would be from informal sources, of which 90% will be reliant on cash. Another 30% of the GDP in the formal sector is denominated in cash. This means that N106.9 trillion of the nation’s entire GDP is denominated in cash,” he tweeted at the time.
Early in March, Bismarck Rewane, managing director of Financial Derivatives Company Ltd, predicted that the impact of the naira crisis on aggregate demand would cause the GDP growth to fall to 1.25 per cent in Q1 2023 from 3.11 per cent a year earlier.
