Fourteen of the 30 largest and the most capitalized companies on the Nigerian Stock Exchange (NSE), reported a loss or lower profits compared to the earlier period as they capitulated to the Covid-19 crisis and the difficult business environment.
The border closure imposed by the government to curb smuggling hindered companies from shipping their products to other neighboring countries, and scarcity of foreign exchange caused exogenous currency shocks that undermined margins.
Stringent rules by the central bank with a view to spur lending to the economy is choking banks that have seen their revenue fall and profit grow at snail pace for the first time in four years.
The combined net income of the most capitalized and liquid (NSE-30) companies was flat at N1.13 trillion, the worst performance in 6 years as key sectors were able to magnify earnings even during the recession of 2016, according to data compiled by MoneyCentral.
Seplat Corporation Development Company, International Breweries, and Julius Berger, posted a combined loss of N49.44 billion as at September 2020.
The largest banks collectively grew net income by a mere 3.57 percent to N706.83 billion as of September 2020 as a low yield environment signals the end of free money.
Guaranty Trust Bank, United Bank for Africa, and EcoBank Transnational Incorporated recorded a decline at the bottom line.
The consumer goods firms, who are the worst hit from an economic downturn, saw their combined net income dip by 6.026 percent to N89.76 billion as at September 2020.
However, the cement makers bucked the trend as they recorded strong growth at the bottom line, many thanks to a reopening of the economy and gradual acceleration in construction activities.
Dangote Cement, BUA Cement, and Lafarge Africa saw their combined net income spike by 36.28 percent to N255.63 billion as at September 2020.
The deteriorating performance of bellwether companies mirrors the state of the Nigerian economy.
Nigeria’s gross domestic product (GDP) shrank 3.6 percent in the three months through September from a year earlier, compared with a 6.1 percent decline in the second quarter, the National Bureau of Statistics (NBS) said, as a lockdown to contain the Covid-19 outbreak, lower oil prices and rampant dollar shortages weighed on output.
Standard and Poor’s global ratings has forecast that the Nigerian economy would contract by 3.8 percent this year, before rebounding by 1.9 percent in 2021.
The Nigerian naira weakened to the lowest level in over three years in the parallel market due to increased demand for dollars amid foreign-currency shortages.
Nigeria’s foreign currency reserves, currently at $35.3 billion (Dec. 01) has dropped by about 3 percent since May when it climbed to 36.6 billion, according to latest data by the Central Bank of Nigeria.
Companies will continue to underperform in an environment where purchasing power is low as over 50 percent of a population of 200 million live on less than $1.98 a day.
Another big elephant in the room is an infrastructure deficit that requires $3 trillion to bridge over the next 30 years, as manufacturers complain that diesel expenses, which form the chunk of energy costs, undermine profitability.