Nigerian businesses have dismissed the rising inflation rate and the exchange rate crisis to record higher revenues and profits.
An analysis of the financial statements of 32 of the most capitalized companies on the stock exchange (excluding commercial banks) found that the companies recorded an aggregate turnover of 5.9 trillion naira in the first 9 months of the year. 2021 compared to the 4.69 trillion naira (or 26.0% increase) posted during the same period in 2020.
- Corporate profits have even done better. The companies collectively posted profits of 756.8 billion naira versus 566.1 billion naira (or an increase of 45.1%) during the same comparative period respectively.
MTN, Dangote Cement, Flour Mills, Nigeria Breweries Nestlé, Total, Julius Berger are some of the companies included in the list analyzed by Nairametrics. Companies derive at least 90% of their income from Nigeria and also pay taxes locally.
The impressive performance was recorded across all sectors of the economy, including oil and gas, food and beverage, brewing, cement, conglomerates, agriculture and construction.
These blockbuster results are despite the headwinds in the Nigerian economy, including rising inflation, rising unemployment and an exchange rate depreciation forced by the Covid-19 pandemic, the collapse in prices of oil, insecurity and citizens abused by the weakening of purchasing power.
How have companies increased their turnover and turnover?
In addition to macroeconomic conditions, the companies in our data set posted a total pretax charge, including finance costs, of 4.8 trillion naira, up 22.4% year on year.
However, despite the headwinds above, overall margins were not negatively affected, with pre-tax margins increasing to 18.4% (from 16% in the same period last year). The excellent results appear to have been achieved through a combination of frequent price increases, shrinkage, targeted marketing and sales attrition as the Nigerian economy reopens.
Specifically, regarding the reopening, the federal government lifted COVID-19 restrictions between May 2020 and ultimately lifted the border closure in December 2020.
Notably, the positive performance recorded by companies aligns with second-quarter GDP data which saw Nigeria’s real GDP growth rate increase by 5.01%, the fastest in about half a decade.
While most analysts, including Nairametrics, attributed GDP growth to base effects, this also reflects the broader resilience of Nigerian companies who have found ways to continuously adapt in a political and economic environment. hard. Nairametrics predicts that this adaptive trend will continue towards the end of the year.
In addition, the depreciation of the Naira exchange rate and government incentives continue to increase the demand for locally produced goods in all sectors, thus supporting domestic companies best positioned to meet the demand.
Finally, Nigerian companies have also benefited enormously from a relatively low interest rate environment and several intervention programs put in place by the central bank. Allowing them to tap into the bond market for short- and long-term debt, to find the funds necessary for business expansion and reinvestment while raising prices.
From a fiscal standpoint, the government has also profited tremendously from windfall profits. According to the data reviewed, the corporate taxes of these companies increased from N192.3 billion to N330 billion during the period under review. This also resulted in an effective tax rate of 30% for the period.
Data from the National Bureau of Statistics reveals that total corporate income taxes collected in the first half of 2021 were N570 billion, an increase from the N383.8 billion collected in the same period in 2020, when the country has been hit hard by Covid-19.
The most efficient
By global turnover
Mobile telecommunications giant MTN tops the ranking as the highest earning company with revenues of around 1.2 trillion naira in the first 9 months of the year and after-tax profits of 220.3 billion naira. MTN also paid a tax of 101 billion naira on its pre-tax profits.
Nigerian cement giant Dangote Cement came in second with revenue of N1 trillion and after-tax profit of N278.2 billion.
The cement / construction sector saw the largest increases in sales, profit before tax (PBT) and profit after tax (PAT). Specifically, revenue increased to N1.68 trillion from N1.27 trillion the previous year while PBT rose to N0.53 billion from N0.36 billion the previous year, and PAT rose to N0.39 billion from N0.29 billion the previous year.
The consumer goods sector posted the second highest increase in revenue to 1.4 trillion naira from 1.07 trillion naira the previous year, although growth in PBTs and PATs was moderate reflecting higher costs. students.
Notably, the brewery sector recovered to post profits in the 2021 period compared to the pre-tax losses and after-tax losses of the previous year.
Adjusted for exchange rate devaluations, the table appears to have a more moderate impact than previously noted. The current income of 5.9 trillion naira after adjusting the current official rate of 410 naira / $ is approximately 14.4 billion dollars. However, the revenue of N 4.69 when adjusted using N375 / $ 1 is approximately $ 12.5 billion. However, the use of a parallel market rate paints a darker picture. Nonetheless, most companies have performed well despite the exchange rate devaluations.
Nigerians carry the box
Nigerians are on the other end of the phone every day and things are going from bad to worse. Purchasing power is eroded as people spend more money on food, despite rampant food inflation. Salary increases have not kept pace with inflationary trends even as some organizations cut jobs and even offer pay cuts.
But just like businesses, Nigerians have also gotten creative. The GIG economy has enabled most people to seek alternative incomes in labor markets outside of Nigeria. Cryptocurrency exchanges have also created new wealth for Nigerians looking for double-digit returns. Ponzi schemes are also on the rise, providing a way for people to get rich quick.
Nigerians in the diaspora have also had a role to play in the economy through foreign remittances and investments in the real and financial sectors of the economy.