Analysts are of the view that Central Bank of Nigeria (CBN)’s decision to weigh on smuggling may ameliorate the pains of consumer goods firms that are struggling with weaker margins and poor declining profit.
For instance, the combined revenue of the largest companies in the country fell by 3.06 percent to N419.4 billion in March 2019, from N435 billion the previous year, according to data gathered by BusinessDay.
Similarly, profit after tax also followed the same downward slope as it dipped by 27.79 percent to N26.82 billion March 2019 as against N37.24 billion the previous year.
Net profit margin, a measure of profitability and efficiency, fell to 6.04 percent to 6.0 percent in the period under review as against 9.17 percent the previous year.
When the net profit margin falls, it means a company isn’t good at converting revenue into profits available for shareholders.
Smuggling and influx of cheap and substantial products are cannibalizing the sales of some companies, and the regulator has said the scourge is undermining economic growth.
In order to curtail block these loopholes, the Governor, CBN, Godwin Emefiele, has said the bank has blocked the accounts of some smugglers sabotaging Nigeria’s economy in the textile, rice and palm oil industry.
Emefiele said the bank will come up with the names of those identified but they want to be sure that they have come up with something that is credible and that the culprits cannot deny. He added that the accounts of some in the textile, rice and palm oil industries had been blocked.
The regulator banned certain items (including Textile, Fertilizers, Palm Oil etc.) from accessing FX from the official window in bid to encourage local industrial production and subdue the foreign exchange crunch of 2014-2017. It also established the Importers’ and Exporters Windows (I and E).
However, smugglers found a way to bypass the system by bringing products through the porous borders.
Dangote Sugar Refinery Plc, Nigeria’s biggest grower of the sweetener, said illegal, low-quality imports are putting pressure on its selling price, while a traffic gridlock around its production site in Lagos is hampering delivery to customers.
“In our opinion, any move aimed at curbing the rising spate of smuggling in Nigeria is welcome given it remains one of the biggest challenges of the real economy’s development in Nigeria after infrastructural deficit,” said Analysts at CSL Stock Brokers Limited.
Analysts at CSL Stock Brokers however said in saner climes, the monetary authority concerns itself with managing the cost, volume & value of money as well as the banking system while the federal government and associated authorities tackle issues such as smuggling via border controls.
A breakdown of the numbers of consumer goods firms shows Dangote Sugar’s sales fell by 7.27 percent to N38.14 billion in March 2019 from N41.13 billion the previous year.
Nascon Allied NASCON Allied Industries Plc’s net income dipped by 34.60 percent to N694.91 million in March 2019 from N1.06 billion the previous year while net margins moved to 10.18 percent in the period under review from 15.67 percent the previous year.
Unilever Nigeria Plc’s profit after tax fell by 20.83 percent to N19.23 billion in the period under review, the first drop in four years while net margin fell to 7.90 percent in the period under review from 11.93 percent the previous year.
BALA AUGIE
