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Wednesday, March 22, 2023

Revenues of Large Nigerian Corporates Growing Faster than GDP

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If you are a Nigerian company operating in the country’s tough macro-economic space of rising inflation and a sliding currency, then it pays to be big.

Thirteen major companies that have released Full Year (FY) 2021 results recorded an average revenue growth of 23% to N4.24 trillion, according to data compiled by economic research firm, Financial Derivatives Company (FDC).

Nigeria’s gross domestic product (GDP) increased by 4.03 percent in the 3rd quarter of 2021, and is forecast by the World Bank to grow by 2.5 percent in 2022.

“Corporate revenues are outstripping GDP and sector growth, driven by higher prices, deepened market penetration, increased customer base and demand for digital services,” said Bismarck Rewane CEO, Financial Derivatives Company Ltd.

“As well as an increase in business and economic activities relative to the 2020 pandemic year.”

Profit for the 13 firms grew an average of 59% to N694 billion, driven by cost optimization and reduction in finance costs, according to Rewane.

MTN Nigeria revenues grew by 23 percent to N1.7 trillion in 2021 and operating income grew by 37 percent to N584.7bn led by increased network capacity following the acquisition and activation of an additional 800MHz spectrum, accelerated rollout of 4G network, data revenue which grew by 55.3 percent to N516bn and a 62.7% increase in data usage from existing subscribers.

Guinness Nigeria saw its revenues soar by 51 percent to N109 billion, supported by higher prices, resilient consumer demand and deepened market penetration. Its bottom line performance surged by a whopping 2,879 percent to N8.8 billion from a loss of N317 million in H1’21.

Fidelity Bank reported its best quarterly performance since Q3’17, with Q4 2021 earnings leaping 62.1% to N11.6 billion. The growth in earnings reflected a doubling in net interest income to N30 billion, supported by the 34.4% growth in interest income.

For its Full Year 2021 unaudited result, there was an increase in earnings primarily driven by a 67.3% decline in impairment charges and a 38.0% jump in non-interest revenue (NIR).

BUA Foods which listed on the Nigerian Exchange in the first week of January 2022 to become the most capitalized consumer goods firm in the country saw net income surge by 99.47 percent to N75.17 billion in December 2021 from N37.70 billion as at December 2020.

Revenue spiked by 73.03 percent to N333.67 billion in December 2021 from N192.54 billion the previous year.

Analysts attribute the strong growth in earnings to an excellent marketing and distribution strategy, diversified product base and the acceptance of the company’s products among consumers across the country.

“BUA is the only sugar refiner to have refining capabilities outside Lagos, Nigeria. In response to Nigeria’s backward integration policy in the Sugar Industry, BUA Group acquired the Lafiagi Sugar Company (LASUCO) in Kwara state in 2008 and established the Bassa Sugar Company in Kogi State,” said analysts at CSL Stock Brokers in a note to clients.

For smaller companies though they have to struggle with high raw materials and energy prices, and the removal of policy measures intended to ease the burden of the pandemic, such as subsidies, implying inflation is likely to remain elevated in 2022.

Food inflation explains the surprise pick-up of Nigeria’s inflation to 15.6% YoY in December, after an eight-month slowdown.

Insecurity, in part due to conflict in northern Nigeria that disrupts farming, has driven up food inflation.

Renaissance capital economist Yvonne Mhango says despite the December pick-up, the firm expects headline inflation to slow to 12.4% at YE22, in part due to a high base effect.

“That said, there is upside risk to our forecast from: insecurity in northern Nigeria; FX depreciation; and structural bottlenecks.”

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