Nigerian companies are beginning to feel the impact of the uncertain macro – environment as early Half Year results point to a growth slowdown in the wider economy.
Among major listed companies that have released results, lender’s such as Stanbic IBTC and Wema Bank saw profits for the period falling by 40 percent and 31 percent respectively.
Consumer goods company Nigerian Breweries reported profits that were lower by 10 percent, while Cadbury made a loss for the period.
For conglomerate, Transnational Corporation of Nigeria (Transcorp) profits for the period were down by 37 percent, while mortgage lender, Infinity Trust, saw profits fall by 27 percent.
“The market, investors and traders alike, at this point in time, require seeing positive outlook for the core market drivers… There has to be a positive change to Nigeria’s macroeconomic story,” said Abiodun Keripe,head of research and investment research and strategy at Elixir Investment Partners Limited.
Growth in Nigeria may be slowing, even as inflation picks up, making it difficult for the Central Bank (CBN) which starts its two day Monetary Policy Committee (MPC) meeting today to ease its tight money stance. The CBN’s benchmark policy rate is at a record high of 13 percent, while a 31 percent reserve requirements for banks starves the real economy of liquidity and loans.
Nigeria’s consumer price inflation rose for a fifth month in June to 9.2 percent and growth in the first quarter of 2015 slowed to about 4 percent, on an annual basis, compared with 5.9 percent a quarter earlier, according to the bureau of statistics.
Oil prices which are down some 40 percent in the past year, have hit the Nigerian economy – which derives 80 percent of government revenue from the commodity – hard.
This is being exacerbated by what analysts see as the inadequate policy responses from the Buhari administration till date.
“The most unambiguous consequence – of Buhari’s delay in forming a cabinet – has been in the economic direction,” said Opeyemi Agbaje, CEO of consulting firm, Resources and Trust Company.
When GDP is measured by expenditure, economists look at consumption, fixed investment and net exports (X-I).
Data from the poor company results suggests that consumption is slowing, while Federal, States and local governments are currently not engaging in much infrastructure spending, meaning there is no trickledown effect for the economy, as such spending often serves as a stimulus.
On the recurrent side of the equation, the late payment of salaries by states is also a drag on consumer spending.
Meanwhile, the slide in oil prices means that net exports may turn negative.
The stock market which is a leading indicator has been selling off since last year, due to election uncertainty and anticipation of weaker corporate earnings.
Nigerian Stocks are down 9.5 percent year to date, compared with the +6.2 percent gain in South Africa’s benchmark index.
The slide in the naira currency at the parallel markets has also led to higher operating costs for firms that import raw materials.
The margin between the official interbank and parallel market rates has risen to over N40 to the dollar, with the CBN fixing its rates around N196/ dollar and black market rates trading around N240 per dollar.
Investors will be waiting for the MPC meeting to have a clear outlook for the naira, while a policy direction by the current administration may set the course for the market in the short term, says Kayode Omosebi, a research analyst at United Capital plc.
“However, we do not expect positive surprises from half year numbers by quoted companies,” Omosebi said.
PATRICK ATUANYA
