President Muhammadu Buhari etched his name in Nigeria’s history, when he became the first candidate to oust an incumbent president since the country’s independence. As a result of the enormous goodwill he enjoyed which secured his victory, and based on his campaign mantra of ‘change’, Nigerians, nay the whole world, expected a lot of positive changes from the former military ruler by subsequently putting the nation on a path of sustainable economic growth and needed infrastructural development.
State of the economy pre-Buhari
In fairness to President Muhammadu Buhari, he inherited a very fragile economy on May 29, 2015 from his predecessor, President Goodluck Jonathan. The economic cloud was not looking bright, especially in Nigeria’s banking system, as a result of the crash in global crude oil prices in the summer of 2014. Crude oil (which contributes as much as 90% of Nigeria’s revenue and 70% of her export earnings) that had been sold for $122 per barrel in June 2014 had crashed to $65, when he took over.
Buhari’s economic era
Buhari began his tenure on a wrong economic note, by failing to form his cabinet in the first six months of his administration. The Commander-in-Chief left the management of the nation’s economy technically at a standstill for 166 days, during which uncertainty crept in; hence, confidence weakened, and capital flight accelerated.
This blunder and many other sluggish starts, no doubt greatly affected the economy to the extent that, by the time the Buhari-led administration began taking action in late 2015, the economy had already been battered, and was entering its first full year recession since 1991 and the worst since 1987.
Nigeria’s economy grew by 3.96% in the previous quarter before he took over the mantle of leadership. But by the end of his first full quarter in September 2015, the economic growth had declined to just 2.84%. As if that was not enough, it further slowed to 2.7% by the end of 2015 — the slowest pace in the democratic era.
Beginning from the first quarter of 2016, the economy went through five straight quarters of declining real GDP growth rates. As a result of two consecutive negative GDP growths, the economy slipped into recession in Q2 2016. Worse still, the administration showed little or no concrete plans mapping how the economy could exit the recession.
Most Nigerians still believe that, apart from his poor economic policies, President Buhari’s poor political handling of the fragile peace in the restive Niger Delta also contributed to the recession, since militants resumed attacks on key oil infrastructure, which led to a decline in Nigeria’s output. The nation’s oil production fell from 2.2 million barrels per day at the beginning of 2016, to about 1.6 million barrels per day for the most part of 2016.
Current state of the economy
The ailing economy was able to finally exit recession, after managing to record a growth of 0.72% in the second quarter of 2017. The improved performances in crude oil, agriculture, manufacturing and trade boosted the economic recovery. Further growths of 1.17% and 2.11% in Q3 and Q4 2017 respectively cemented the recovery with an annual growth of 0.82% for 2017, which was higher by 2.42% than -1.58% recorded in 2016.
Although the economy made some recovery after exiting the recession, the gains recorded have since been eroding away. Nairametrics published an article a few weeks ago, where it brought its readers’ attention to the struggling state of the Nigerian economy, after recovering from the economic recession in the second quarter of 2017.
The economy had initially made a post-recession recovery in Q2 and Q3 2017 before it began declining gradually in the first quarter of 2018 – when GDP fell to 1.95% representing a quarter on quarter decline of 7.58%. Since then, the Nigerian economy has been recording macro-economic indices which show that the economy is really on a decline.
Buhari’s current economic indicators
- Although GDP grew by 1.50% in the second quarter of 2018, it slowed down by 0.45% from the growth rate of 1.95% recorded in the previous quarter of Q1 2018, indicating that the economy is still very fragile.
- Nigeria’s external reserves have been on a free fall in the past few months. It instead dropped below $47 billion for the first time in 4 months, on August 6, 2018. It has been dropping since then and currently stands at $43.84 billion as at October 5, 2018.
- This administration met Nigeria’s debt profile at N12.12 trillion, as at the end of June 2015, but the total debt stock currently stands at N22.38 trillion at the end of June 2018. The worst part of it is that the nation is still borrowing and planning to borrow more.
- President Buhari came in when the value of Naira was around N190 to a dollar, but that exchange rate is now wishful thinking, as it has since soared. As at today, the exchange rate is N358 to a dollar.
- The unemployment rate was at a single digit of 8.3% in the second quarter of 2015, when Buhari came onboard. The unemployment rate remains one of the economic indices that this regime has not been able to stop its dwindling fortunes, with the index jumping to 18.8% by the third quarter of 2017.
- The ease of doing business is very poor in Nigeria now. The World Bank currently ranks Nigeria 145 out of 190 countries in its Ease of Doing Business index for 2018, showing how difficult it is to set up and operate a business in Nigeria.
- The number of Nigerians wallowing in extreme poverty has continued to increase, with Nigeria overtaking India as the nation with the highest number of poor people, in May this year, with about 87 million Nigerians living in extreme poverty.
Can Atiku revive the struggling economy?
Though there are scores of presidential aspirants aiming to take over Nigeria’s seat of power, Aso Rock, Atiku Abubakar will be President Buhari’s main challenger come February 16, 2019, since he emerged as the People Democratic Party’s (PDP) presidential flag bearer last weekend.
Interestingly, Atiku is not new to the presidency, as he was the deputy Commander-in-Chief to President Olusegun Obasanjo, from 1999 to 2007. Nevertheless, being the general commander (president) is a different ball game entirely. He also rose to the second-in-command position in the Nigerian Customs Service – serving as Deputy Director before retiring in 1989.
He was reported to be very powerful and influential in the administration of President Obasanjo in the early 2000s, when Nigeria recorded some economic advancements, before falling out of favour with his boss, towards the tail end of their second tenure.
That administration is still regarded by many to have assembled Nigeria’s best economic team ever, comprising world-class professionals that included Ngozi Okonjo-Iweala, Charles Soludo, Nuhu Ribadu, Nenadi Usman, Nasir El-Rufai, etc. The economic team was led by Atiku and it achieved several economic feats, among which was stable economic growth, which saw the Nigerian economy grow at 33.7% in 2004, 10.4% in 2003, 8.2% in 2006, etc. The economic team’s greatest achievement was securing a debt relief of $18 billion for Nigeria, from the Paris Club of Creditors in 2006.
Atiku’s economic ideas
Speaking recently in Minna, the PDP presidential candidate lamented the high level of joblessness and poverty in Nigeria, claiming that recent indices in Nigeria have revealed that the nation has not fully recovered from the recession. He said:
“The nation has recorded the lowest economic growth since the return of democracy. It is clear that the APC government has failed so far as economic growth is concerned, that is why we have the highest level of joblessness and poverty.”
Also, at a parley in the Catholic Bishop Conference of Nigeria in 2014, Atiku identified waste, poor management and failure to diversify the economy, as the reasons for the adverse economic impact of the fall in oil price then. According to him:
“Had we been able to diversify and manage our economy in such a way that we conserve rather than waste our resources in surplus years, the present austerity measure would not be necessary.”
The PDP flag bearer went ahead to inform the bishops that it was the need to streamline Nigeria’s alarming debt stock, when he was Vice President that compelled him to get the World Bank to assign Prof Ngozi Okonjo-Iweala to join his economic team in the presidency, to locate and collate Nigeria’s actual debt for liquidation. He claimed that the former Minister of Finance worked in his office for nine months which led to the establishment of the Debt Management Office (DMO).
Meanwhile, in his response to a popular comedian last December, the ex-Vice President stated:
“If you ask what our first task was, coming into government in 1999, it was to bring stability to the economy after decades of military rule. Between 1999 and 2003, oil prices then were hovering between $16 and $28, yet we managed to pay up salaries from decades back, clear up our national debts and build up foreign reserves. Our GDP grew at the fastest rate we have seen, since the return of democracy.”
Who can manage the economy better?
Nairametrics conducted a Twitter poll immediately after the former Vice President won the PDP presidential primary on Sunday, where people were asked to choose who they think can manage the economy better among the trio of President Buhari, Atiku Abubakar and SDP presidential candidate, Donald Duke.
More than half of the respondents to the poll (55%) believed that Atiku will be able to manage the fragile economy better, after May 29, 2019. Donald Duke was second with 24% of the poll, while President Buhari was the least among the trio – after almost 4 years of governance, he only got 21%.
Quoting Onye Nkusi, a public analyst on Twitter, “The business community will prefer Atiku to Buhari, but not sure how much weight they carry.”
Being an employer of labour himself, the business community and millions of unemployed Nigerians may prefer Atiku who they will see as one of their own.
Speaking with Nairametrics, a popular financial expert, who prefers to be anonymous said:
“Based on track records, there appears to be likelihood that Atiku will perform better, but this can only be confirmed in hindsight.”
Meanwhile, an economic expert, Alex Onwodi, who also spoke with Nairametrics disagreed with the poll. He said:
“I think Buhari has learnt his lessons and will manage the economy better in his second tenure than Atiku, who will be a new comer.”
Another top financial expert who responded to Nairametrics on the condition of anonymity believes that Buhari is a leader who is more inclined towards socialist policies that cater more to the poor and stifling corruption, even if it means shutting out the flow of money in the economy. He explained,
“For Buhari, much of his economic polices have not delivered the growth spurt expected following the exit from recession. It is even believed that as things stand, we might slide back into a recession. He has also been short on implementing some of the reforms required to create the foundations for a sustainable economic transformation.”
“Atiku, on the other hand, has been tested as the Vice President during the era of president Obasanjo who presided over a period of economic growth. Atiku’s private sector experience and flexibility, when it comes to economic policies, suggest that he may be better suited to implement tough home grown economic policies that might produce the sort of growth required to move the country forward.”
Nevertheless, Nairametrics believes that President Buhari should not be ruled out of the race entirely, as some Nigerian voters do not vote from the economic point of view, but rather cast their votes along religious, political and ethnic lines.
Analysis: Total Nigeria needs a financial overhaul
Total Nigeria’s Q1’20 results are a testament that some might have it worse than others as it recorded a revenue drop of 9.3% to N70.2 billion
The Oil Industry has had a particularly tough year, owing primarily to the novel pandemic. The International Energy Agency (IEA) predicts that the global oil demand is expected to further decline this year as Covid-19 spreads around the world, constraining travel as well as other economic activities.
Organizations like Total depending on international trade will be forced to scale down operations until restrictions ease off. However, Total Nigeria’s Q1’20 results are a testament that some might have it worse than others.
The period recorded a revenue drop of 9.3% to N70.2 billion in the first quarter of this year compared to Q1 2019. Total earns its revenue from three main sectors namely: Networks, General Trade, and Aviation. Revenue from Aviation fell by 39.5%. The decline in Networks is attributed to the reduced demand as a result of the enforced lockdown and restriction on travel across the nation.
Yet, it is clear that the company had its own challenges pre-COVID-19. In the quarter, it attained a loss after tax of N163 million which was 65.6% better than the loss after tax of the comparative quarter; it is overwhelmed by a myriad of distinct issues.
First off, its revenue has experienced a steady fall over the years; reasons for this is tied largely to its lack of importation of petroleum products.
It is also burdened by inefficiencies in its operations evident in its high operational and direct expenses, as well as its high debt over the past years. The company has carried on huge loans and borrowings in its books: N40.6 billion in 2019 and only a marginal reduction of N2.2 billion in the current year.
Even higher are its expenses after an 8.38% reduction in the just-released results, it arrived at N69.7 billion for Q1 2020. Amongst its high operational expenses is the high and increasing technical fees it pays to its parent company. From N251 million in the first quarter of last year, it incurred around N700m in the year under review. It also has cash flow issues with about N22b in negative cash and cash equivalents. In its 2019 report, it revealed that the year had been tough with its cost of doing business rising exponentially as evident in its interest expense, 395% higher than the previous year as a result of repayment for products and a high level of borrowing.
The company, in its last full year annual report, noted that to make significant savings to both operational and capital expenditure costs, a series of initiatives relating to cost efficiency, process optimization, and significant reduction of working capital requirement and finance costs, were put in place and are in motion for this year.
As Dr. Fatih Birol, IEA’s Executive Director put it “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels.”
However, Total’s position goes beyond the impact of the pandemic. Its rebound rests on its ability to carry on with cost control and lower debt commitments, together with the speed of the containment of the virus. That said, the company might need to raise capital soon while also coming up with formidable strategies to strengthen its business model.
Merger, Tax incentive boosts BUA Cement FY 2019 result
BUA Cement Plc recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.
One of the industries set to experience the downsides of the Covid-19 pandemic is the construction industry. Given the slowdown in construction activities as a result of the lockdowns and constrained economic activities, the reasons are not farfetched.
Prior to the outbreak of the pandemic, Globe Newswire had predicted an accelerated growth pace of the global construction industry from 2.6% in 2019 to 3.1% in 2020. This growth has now been revised to 0.5%. What is even more daunting is that the revised growth rate is based on the assumption that the outbreak will be contained across all major markets by the end of the second quarter of 2020.
It is only after that (including freedom of movement in H2 2020) that events could facilitate reverting to the normal course of activities to foster businesses in the industry like BUA Cement or those that depend on it to restart activities.
Nigeria’s third-largest cement company, BUA Cement Plc, however, still has its 2019 victories in order. Involved in the manufacturing and sales of cement, BUA Cement has 3 major subsidiaries and plants in Northern and Southern Nigeria.
With a market capitalisation of N1.18 trillion ($3.3 billion), BUA is the third most capitalised company on the NSE. Its recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.
The company’s profits also increased by 69.1% from N39.17 billion in 2018 to N66.24 billion in 2019. Core operating performance was strong, and this was supported by strong cement sales in the domestic market, impairment writes back, and other income.
The main reason for the company’s increased earnings is from the cost synergy and increased revenue as a result of the merger that took place between CCNN Plc and Obu Cement Company Limited.
There was also a striking jump in its income statement on its tax for the year. For FY 2019, it incurred a tax expense of N5.6 billion, in comparison to the N24.9 billion tax credit it received in FY 2018.
This was as a result of a reversal of previous tax provision made on Obu Line 1; it received approvals for an extension of the company’s pioneer status on Obu line-1 and Kalambaina line-2 in February 2020, to leave effective tax rate at just over 8% in 2019. The pioneer status will help the company save funds that will otherwise have been spent on higher taxes.
(READ MORE:Dangote Cement to access more debt funding)
BUA reported an impressive FY’19 result. Its performance shows the growing strength of the company and its increasing market share. On the back of the strong performance, management declared an N1.75 dividend per share that translates to a dividend yield of 5.5% on current prices.
Cash flow position was also robust with a strong closing cash balance – from N2.8 billion in 2018 to N15.6 billion as at year ended 2019. The company’s growth, as well as the impact of its merger, present a great buy opportunity of the highly capitalized, low-cost stock. As of today when the market closed (21st May) its share price stood at N35.60 from a 52-week range of N27.6 and N41.
What we see is a great growth stock further heightened by the population expansion and increased urbanization. However, we expect the impact of the Covid-19 pandemic to be felt from the Q1 results of the company.
The industry could slow down for the year as the level of commercial construction also slows down. Yet the best part of holding stocks like this is that even with stalled operations for a period, a resurgence will always emerge.
Analysis: Airtel Nigeria is winning where it matters
Airtel has left no stones unturned in ensuring that its provisions are top-shelf – subscribers to the network, of course will have their own ideas.
Airtel might have won our hearts over with internet-war adverts starring our favourite tribal in-laws, but its fundamentals are what will make us the bucks that keep us happy. Airtel Africa Ltd is a subsidiary of Indian telecoms group, Bharti Airtel Ltd; the group has left no stones unturned in ensuring that its provision of prepaid plans, credit transfers, mobile internet services, messaging, roaming facilities and more, are top-shelf – subscribers to the network, of course, will have their own ideas.
Since last year when Airtel Nigeria became the second telecommunication company in Nigeria listed on the NSE, the company has experienced a steady level of growth. With a presence in 14 African countries, the group’s strength lies in its diversity with stronger companies mitigating the poor performances of others.
Performance Overview: Airtel Africa
Airtel Africa’s report for the year ended March 2020, revenue jumped by 10.9% from $3.1 billion at the year ended 2019 to $3.4 billion in 2020. The consolidated profit before tax also jumped by 71.8% from $348 million in 2019 to $598 million in 2020. However, profit for the period dropped by 4.23% with earnings of $408 million in 2020 from the $426 million it had earned in 2019. A reason for this is the tax figure that moved from a credit of $78 million in 2019 to tax payments as high as $190 million in 2020. Total assets also jumped by 2.41% from 2019’s value of $9.1 billion to $9.3 billion in 2020 primarily as a result of their acquisition of more property, plant, and equipment (PPE). The total customer base grew by 9.3% to 99.7 million for the year ended.
Full Report here.
Revenue growth of 10.9% was driven by double-digit growth in Nigeria and East Africa. However, the rest of its African operations experienced a decline in revenue. Its success in Nigeria is especially commendable, considering the fact that the company lost more than 100,000 subscribers in Nigeria between December 2019 and January 2020. Raghunath Mandava, Chief Executive Officer, remarked that the results which were in line with the group’s expectations, “are clear evidence of the effectiveness of our strategy across Voice, Data and Mobile Money.”
Behind The Numbers – Nigeria
Airtel Nigeria’s performance indicates the company is making the right calls in a very competitive industry. Nigerians are fickle when it comes to data and voice but will spend if the service is right. The company grew its data revenue by a whopping 58% to $435 million a sign that its strategy to focus on data is working. Voice Revenues for the year was up 15% to $850 million. In total, Airtel Nigeria’s revenue was up 24.4% to $1.37 billion. Ebitda margin, a number closely watched by foreign investors 54.2% from 49% a year earlier. Operating profit for the year ended also jumped by 52.6% for the year from 2019 and 32.4% from Q1 2019. Total customer base in Nigeria also grew by 12.5%.
Nigeria is surely critical to Airtel Africa’s future seeing that it contributes about one-third of its revenue. Recent results thus indicate it is winning where it matters most and it must continue to stay this way if it desires to survive a brutal post-COVID-19 2020. Telcos are expected to be among the winners as Nigerians rely more on data to work remotely but there are other players in this game. Concerning the impact of the pandemic, he explained that at the time of the approval of the Group Financial Statements, the group has not experienced any material impact arising from the impact of COVID-19 on its business.
On cash flows…
The group has also taken measures to enhance its liquidity. The CEO explained that it is moving its focus to enhance liquidity towards meeting possible contingencies.
“Having considered business performance, free cash flows, liquidity expectation for the next 12 months together with its other existing drawn and undrawn facilities, the group cancelled the remaining USD 1.2 billion New Airtel Africa Facility. As part of this evaluation, the group has further considered committed facilities of USD 814 million as of date authorisation of financial statements, which should take care of the group’s cash flow requirement under both base and reasonable worst-case scenarios.”
To this end, they have put in the required strategies to preserve its cash as its cash and cash equivalents, consequently, jumped by 19.1%.
Investors looking at this impressive result will be wondering if this portends a buying opportunity. Airtel Nigeria closed at N298 on Friday and has remained at this price for about a month. The stock is quite illiquid and is not readily available to buy.
It’s the price to earnings ratio of 4.56x makes it quite attractive. Further highlighting this opportunity is its price-to-book ratio which is as low as 0.5273, suggesting that the stock could be undervalued. Whether it is available to be bought, is anyone’s guess.