Revenues of listed manufacturers were nearly flattish while profit slumped as coronavirus pandemic caused disruption to business across almost all sectors of the economy.
The largest manufacturers on the floor of the Nigerian Stock Exchange saw combined net income fall by 1.47 percent to N116.62 billion in March 2020 from N118.37 billion the previous year, based on data gathered by BusinessDay.
Revenues grew by a mere 2.48 percent to N1.11 trillion as at March 2020, as border closure, slow construction activities and weak consumer sentiments continue to underpin bleak outlook.
Business conditions in the Nigerian manufacturing sector have been untenable over the past decade, which is one of the reasons for high unemployment as companies downsize workforce to stay afloat.
The industry was knocked sideways and into contraction territory by impact of Covid-19. Difficulties in obtaining raw materials, shipping delays and closed borders have led to the sharpest contractions.
Also, consumer spending has been further dealt a severe blow due to the lockdown, compounding the woes of firms that may not find it easy passing on rising input cost-in form of higher price to consumers.
“There were restrictions on raw materials from other countries during the lockdown. Brewers will be the hardest hit as there are no markets for their products. No weekend entertainment and if this continues they may be forced to retrench workers,” Ambrose Oruche, acting director-general, Manufacturers Association of Nigeria, said. “While government has announced that it will give incentive to pharmaceutical firms, gas price has gone up. They have to challenge with products from China.” Oruche said companies need bailout or grant for those that have not been doing business for a while so that they do not have to sack workers. He also advocated lower duties on imported raw materials so as to reduce cost of production.
The Purchasing Managers Index (PMI) data released by the Central Bank of Nigeria (CBN) for the month of May showed significantly weakened activity levels. Manufacturing PMI declined from 51.1 in March to 42.4 in May, the lowest level since September 2016.
As a result of the impact of Covid-19 on an already fragile environment, the International Monetary Fund (IMF) estimates that Nigeria’s economy will contract by 3.40 percent this year.
Triggered by collapse in oil price due to weak demand from China and other rich countries, Nigeria’s foreign reserves came under pressure, forcing the central bank to weaken the currency to N360 from N305.
Nigeria’s annual inflation rate rose for the ninth consecutive months to 12.40 percent in May from 12.34 percent in April, indicating a deterioration in consumer purchasing power.
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry, said due to the depreciation in exchange rate and travel restrictions between April and May, it was expected that inflation rate would have increased beyond 12.4 percent.
Experts have called on government to reduce personal income tax so that shoppers can afford manufactured products as government will earn more revenue in form of Companies Income Tax (CIT).
The largest drug makers saw a 38.52 percent drop in first quarter profit, while revenue was down 2.60 percent, but the sector may rebound to growth as the central bank listed some operators in the industry that will benefit out of its N3.50 trillion Covid-19 intervention fund.
Consumer goods firms, who have always felt the pang of an economic downturn, saw net income reduce by 23.42 percent to N34 billion as at March 2020.
However, the industrial goods industry bucked the trend as major players recorded a combined 7.50 percent uptick in net income to N90.39 billion as at March 2020, thanks to double growth earnings recorded by Lafarge Africa, BUA Cement, and Beta Glass.
But analysts and investors say a cut in capital expenditure by government as a result of Covid-19 induced shocks and paralysis in the construction activities due to lockdown measures means bleak outlook for an industry susceptible to macroeconomic uncertainties.
Khaled El Dokani, chief executive, Lafarge Africa, said the company would freeze capital expenditure this year. He forecast a drop in second-quarter sales as the coronavirus pandemic hits demand.
