Tourist Company of Nigeria’s high expenses hit profits

Tourist Company of Nigeria Plc have had huge operating expenses wipe out all of its revenue as the hotel and hospitality firm continues to grapple with a sluggish economy and security challenges that has deterred travellers from Africa’s largest economy.

For the first six months ended December 2015, Tourist Company of Nigeria posted a loss after tax of N307.01 million as against a larger N896.56 million in losses recorded in 2014.

Sales fell by 0.1 percent to N1.61 billion in 2015 from N1.61 billion the previous year.

The faltering performance of the company was as a result of operating expenses of N1.63 billion, that swallowed all of its N1.61 billion in sales, culminating in operating losses of N24.05 million.

Tourist Company of Nigeria’s operating expenses to ratio was N1.01 percent in the period under review, which means the hospitality giant spent N101 on operating expenses for every N100 generated in sales.

Industry experts attribute the foundering performance of Tourist Company of Nigeria to the weakness and volatility in currency, upward pressure on costs as a result of huge energy bills, dampening house hold disposable income and domestic spending.

These uncertainties means less people will crave for hotel accommodation, hospitality, and tourism as a sluggish economy means consumers will spend the little they have on consumption.

A fall in oil price by more than 70 percent to $32 a barrel in the last one year has hit the economy of Africa’s largest oil producer, forced the central bank to devalue the naira and impose foreign exchange restriction to stabilize the economy.

Oil accounts for two thirds of government revenue and 90 percent of foreign exchange earnings.

Nigeria’s consumer price inflation stood at 9.6 percent year-on-year in December, up 0.2 percentage points from November, and still above the central bank’s target upper limit of nine percent, the national bureau of statistics said in January.

Hitherto, Hotels were spring up between 2011 and 2014 on the back of a huge population of 170 million and rising middle class.

But as a result of the drop in oil price, economic growth has slowed to 2.8 percent, the sharpest fall since 1999.

The direct contribution of Travel & Tourism to Nigeria’s GDP in 2014 was NGN1, 560.2bn (1.7% of GDP), according a 2015 report by the World Travel and Tourism Council (WTI).  This is forecast to rise by 2.4 percent to NGN1, 597.1bn in 2015.

Despite the aforementioned contribution to the economy, Nigeria’s 1.7 percent contribution ranked behind other Sub Saharan African countries like Morocco, Tunisia, Egypt, Gambia, Senegal, Kenyan, Nairobi, and South Africa with an 8.1 percent, 7.4 percent, 5.9 percent, 5.1 percent, 5.1 percent, 4.1 percent, 3.0 percent, and 3.0 percent contributions to their various economies.

Analysts say an end to the insurgency in the north of the country, bridging the infrastructure deficit and a clear economic direction will attract investors and hence increase the demand for hotel, accommodation and hospitality business.

This also means an economic recovery will spur Tourist Company of Nigeria and its peers to growth.

Tourist Company of Nigeria’s stock price closed at N3.75 on the floor while market capitalization was N7.88 billion.

 

BALA AUGIE