On the heels of impressive earnings in nine months ended
Inflation rate in January was 16.47per cent but increased to 17.33 per cent in February. The bureau had disclosed that the country's inflation rate hits all-time high in
Aside from the double-digit inflation rate, the marginal Naira/US dollar rate movement in the official market also resulted in the increase in general prices of goods and services.
Analysts said hike in listed banks OPEX was majorly driven by regulatory costs, stressing that challenges witnessed in the process of disturbing goods and services compounded on listed companies OPEX in the period under review.
They expressed that cost of buying diesels and trucks materials in the period under review have increased significantly, a major factors also contributing to cost of goods and services distribution.
Analysis of the companies results showed that
The breakdown revealed that MTN Nigeria reported total OPEX of N371.28billion in nine months of 2021, an increase of 24.3 per cent from N298.75billion reported in nine months of 2020.
The Chief Executive officer, MTN Nigeria,
"Capital expenditure (Capex) in the period was 34.4 per cent higher to N261.1 billion, as we continued to invest in our network to maintain service quality and aggressively expand our footprint in terms of 4G with additional 2,723 sites. Notwithstanding, we recorded a healthy free cash flow of N373.4 billion, up by 23per cent. Despite a 27.9per cent increase in core capex excluding the right of use assets to N166.5 billion, capex intensity remained within target levels at 13.8per cent. Depreciation and amortisation rose by 13.3per cent, and net finance costs increased marginally by 1.7per cent due to the lower interest rate environment."
As for the banks,
The Access bank had explained that the growth in OPEX was driven by the enlarged franchise following the acquisition in
The breakdown of
"We continue to optimize our costs despite the inflationary environment," the bank had explained.
The international breweries OPEX was driven by 32.5 per cent increase in Marketing and Distribution Expenses to N69.11billion in nine months of 2021 from N52.15billion reported in nine months of 2020, while Administrative Expenses rose by nearly 11 per cent to N17.58billion in the period under review from N15.89billion reported in prior period under consideration.
Of the three considered cement manufacturing companies,
The company reported 26.2 per cent increase in OPEX to N11.74billio in nine months of 2021 from N9.3billion reported in nine months of 2020, driven by 53 per cent increase in administrative expenses.
He highlighted that implications of high inflation rate include escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilization, high food prices which impacts adversely on citizens welfare and aggravates poverty.
He further stated that Weak purchasing power, which poses significant risk to business sustainability and price volatility, which undermines investors' confidence are major implications of high inflation pressure.
He explained that the major drivers of inflation and cost in the economy include exchange rate depreciation, which has a significant impact on headline inflation, "especially the core sub index and liquidity challenges in the foreign exchange market impacting adversely on manufacturing output."
He added, "High transportation costs affecting distribution costs across the country. This is also reflected in the huge differential between farm gate prices and market prices; monetization of fiscal deficit (CBN financing of deficit) is highly inflationary because of the liquidity injection effects on the economy. This becomes worrisome when statutory thresholds are exceeded and high transactions costs at the nations ports increases production and operating costs of businesses."
To tame the current inflationary pressure, he urged government to reform the foreign exchange market to stabilize the exchange rate and reduce volatility and address foreign exchange liquidity issues through appropriate policy measures.
Others are: "Address the security concerns causing disruption to agricultural activities, address the challenge of high transportation cost, reduce fiscal deficit monetization to minimize incidence of high-powered money in the economy, reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of the sharp depreciation in the exchange rate and address concerns around high energy cost."
In his reaction, Head, Financial institutions, Agusto & Co, Mr.
According to him, "Hike in operating expenses differs from banks to banks. AMCON levy and NDIC premium also contribute to OPEX of banks. Dont forget that double-digit inflation rate and fall in the Naira this year impacted on banks expenses. Since banks are not operating in isolation, of course it is expected to affect their OPEX in the period."
Also speaking, the CEO, Enterprise Stockbrokers, Mr Rotimi Fakeyejo told THISDAY that severe business operating environment impacted on banks and companies OPEX in the period.
He said that banks and companies were prudential in managing cost on the need to stay profitable.
He, however, charted a stable path for the economy to continue to expand its potential capacity through investment in infrastructure.
According to him: "Overall, the MPC assessed the headwinds and tailwinds to growth, as well as, the upside risks to inflation, noting the immense effort by both the monetary and fiscal authorities to achieve a substantial recovery in output growth and decrease in inflation.
"The Committee urged the
A member of the MPC, who is also Deputy Governor, Corporate Services, CBN noted that the current pressures on domestic prices appear firmly rooted in supply shocks related to the COVID-19 pandemic and insecurity.
"Increasing domestic production of goods and services and easing distribution bottlenecks appeal to me as the proximate solution to the inflation pressures," he suggested.
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