Following double-digit inflation and depreciation of the naira at both official rate/ parallel markets,
THISDAY analysis of the companies' unaudited first quarter result and accounts for period ended
The 22 companies listed on the
The investigated companies constitute 13 Deposit Money Banks (DMBs), three cement manufacturing companies, one telecommunication company, two oil/gas companies, among others.
Analysis of the 22 companies' performance revealed that
A breakdown revealed MTN Nigeria reported OPEX of N214billion in Q1 2022, an increase of 18.3 per cent from N180.77billion reported in Q1 2021, while
The Chief Executive officer, MTN Nigeria,
The Group Managing director,
"The acquisitions that we made brought with it increased operating expenses from the various entities that we have before we start revving up the revenues derived from those entities."
ETI's OPEX had grew by nearly eight per cent to N105.32billion in Q1 2022 from N97.63billion reported in Q1 2021.
The growth in OPEX of these 22 companies is on the backdrop of
The bureau also had stated that
According to analysts at the Economist Intelligence, prices of global commodities, including energy, are rising rapidly and fueling runaway inflation and instability in much of
They added that the cost of living crisis is being exacerbated by the
Besides inflationary pressure, the marginal increase in Naira/US dollar exchange rate in the official market also resulted in the hike in general prices of goods and services in the first three months under review.
The Central bank of
Meanwhile, analysts have 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.
The CEO,
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."
Analyst at
According to him: "The upsurge was witnessed in inputs sourced locally (especially raw materials & consumables, fuel and power consumed, distribution expenses, among others). In addition, most listed companies complained about the depreciation of Naira as it raised cost of imported raw materials during the period.
"The high cost of imported raw materials and inputs sourced locally resulted in lower profitability of some listed companies, especially those who found it difficult to pass the cost to the final consumers."
Similarly, some analysts believe regulatory levy by
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.
"Don't forget that double-digit inflation rate and fall in the Naira have impacted on companies' expenses. Since these companies are not operating in isolation, of course it is expected to affect their OPEX in the period."
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