A lot has been said about the value of “Diasporans”. A recent report by PwC on “Strength from Abroad” reported that over 1.24 million Nigerians lived abroad (2017) and these migrants’ remittances to the country accounted for 23.8 billion dollars in 2018. The Education USA – an initiative of the US Department of State Network Fact Sheet: Opportunity Funds Program noted that Nigeria ranked 13 among the nations sending students to study in the U.S. and the current students legally in US schools are over 12,673. This does not include Nigerian-Americans.
The staggering revenues and the Human Capital above bring to the table the value of the Diaspora to Nigeria. One area we are beginning to hear the voices of the Diaspora is the advancement of democracy. A number of them returned to serve in various areas of government at the State and National levels, but even more have begun to advocate for more transparency in the electoral process. This is true not only in Nigeria but in Africa.
Over the years, many African nations have struggled in many fields, particularly in the electoral area. This, in turn, has hindered many citizens from experiencing the process of free and fair elections as well as the true dividends of democracy. Cases of electoral malpractice, according to PRIF Blog, include ballot stuffing, violence during election, voting manipulation, inflation and illegal alteration of vote counts.
In order to harbour a safer election atmosphere for people, there have been plans made by certain individuals to ensure an improvement in the electoral system. For instance, in Nigeria, there has been an establishment of a new initiative called Restore Naija. The main purpose of this stratagem is to look at ways to revamp the electoral process in Nigeria through exploring newer technologies like the Blockchain.
I had the opportunity of speaking to the co-founder of Restore Naija, Christian Emele, over the phone last week. The organization just wrapped up the first-ever Digital Voting Summit last Monday in Abuja, where a clear idea and a strategy was developed to take Nigeria’s electoral system to the next level.
He explained to me that the reformation of the Nigerian electoral system would not only involve Nigerians in Nigeria but also Nigerians living abroad. In fact, the electoral advocacy plans for Restore Naija in 2020 has scheduled to hold town hall meetings across Nigeria and in the diaspora, mainly in the United Kingdom and the United States.
Emele and a lot of others like him believe that the extensive focus and inclusion of the diaspora in African affairs, especially in Nigerian elections, would be beneficial to the growth of Nigeria as a nation. This is especially because the youth in the diaspora often have a strong financial background which could be utilized towards the development of the continent.
Indeed, Emele’s analysis and assertions about the diaspora are correct. According to a report by the Brookings Institution, members of the diaspora are not only educated but also have significantly higher incomes and large amounts of money in foreign banks, compared to their counterparts in Africa.
The Migration Policy Institute also reported that the African diaspora was key in sending an estimated amount of $40 billion to their mother countries in 2010. In addition, the International Monetary Fund highlighted that the worldwide African diaspora saves an estimated amount of $53 billion annually.
The IMF emphasized that if 10 members of the diaspora could invest $1,000 in countries of origin then the African continent could raise almost $3 billion a year for development financing.
Members of the African diaspora have also set up businesses in their countries. Mr. Azuka Okafor, a Nigerian immigrant currently based in Cincinnati, Ohio, is one of them. He has established a construction and properties Company, as well as a technology Company in his home country. Mr. Joe Ogbechie the convener of “Hands on Deck” has been working to empower youth since 2018. Nneka Mobisson, a Nigerian-American set up MDoc, a mobile platform that “provides people living with chronic disease with 24/7 access to virtual healthcare providers”. The list is endless.
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It is without a doubt then that there is a need for African countries to reach out to their brothers and sisters in the diaspora because there is a lot of access to excess finance and human capital, which could be used constructively to develop the African society either in the field of the health sector or even the electoral process for examples.
Africa!! This is a callout – leverage our brothers and sisters in the diaspora eagerly waiting to work for progressive change.
Paul Olele Jnr writes from Washington DC. He is a 2019 graduate of George Washington University and currently works as graduate Media and Research Intern at the Initiative for Global Development.
GlaxoSmithKline in big trouble as losses mount
The results were less than impressive with several key indicators showing a year-on-year decline.
GlaxoSmithKline Consumer Nigeria Plc (“GSK Plc” or “the Company”) is a public limited liability company with 46.4% of the shares of the Company held by Setfirst Limited and Smithkline Beecham Limited (both incorporated in the United Kingdom), and 53.6% held by Nigerian shareholders.
The ultimate parent and controlling party is GlaxoSmithKline Plc, United Kingdom (GSK Plc UK). The parent company controls GSK Plc through Setfirst Limited and SmithKline Beecham Limited.
The Company recently published its unaudited first quarter (Q1) 2021 consolidated financial statements for the period ended 31 March 2021.
The results were less than impressive with several key indicators showing a year-on-year decline. For example, Group revenue (turnover) declined from ₦4.99 billion in Q1 2020 to ₦3.46 billion in Q1 2021 a drop of over 30.66%. The revenue drop was due to a sharp decline in the local sale of its healthcare products.
Total loss after tax as of Q1 2021 was ₦238.07 million compared to a profit after tax of ₦113.47 million for the same period to Q1 2020.
The company is essentially divided into two segments viz: Consumer Healthcare and Pharmaceuticals. While the Healthcare segment was largely profitable in Q1 2021 (making a profit before tax of ₦ 8.73 million by March 31, 2021, the pharmaceuticals segment made a loss of ₦262.93 million in the same period.
The Consumer Healthcare segment of the company consists of oral health products, digestive health products, respiratory health products, pain relievers, over the counter medicines, and nutritional healthcare; while the pharmaceutical segment consists of antibacterial medicines, vaccines, and prescription drugs. While goods for the consumer healthcare segment are produced in the country, the pharmaceuticals are all imported.
The largely imported pharmaceutical products are thus exposed to the vagaries of foreign currency fluctuations coupled with a negligible to no revenue from the foreign sale of its healthcare products (same as in Q1 2020) as it barely exports its products out of the country.
The cost of importing the antibacterial, vaccines and prescription drugs, and the significant local operating expenses wiped off the marginal gross profits made by the pharmaceutical segment of the company. In effect, the gross profit of ₦508.12 million made by the pharmaceutical segment of the company was eliminated by an operating expense of ₦735.7 million and this resulted in a net loss for the pharmaceutical segment of the business.
Apart from the impact of imported pharmaceutical products as already discussed, other issues that affected the company’s Q1 2021 results and are likely to continue to affect its performance in future include:
- A limited product mix that has only the likes of Macleans and Sensodyne (Oral Healthcare); Pain relievers (Panadol and Voltaren); Digestive Health (Andrews Liver Salt); and Respiratory Health (Otrivin and Panadol Cold and Catarrh) all within the Consumer Healthcare segment.
- Increased competition, particularly from local pharmaceutical manufactures of similar over the counter medicines and other prescription medications and vaccines.
In addition, in October 2016, GSK Plc divested its drinks bottling and distribution business that manufactures and distributes Lucozade and Ribena in Nigeria, and other assets including the factory used for the drinks business to Suntory Beverage & Food Limited. The loss in revenue from these popular brands continues to impact its topline.
GlaxoSmithKline (GSK) is a global healthcare company and is well-known and acknowledged for its pioneering role in discovering and distributing vaccines for the likes of hepatitis A and B, meningitis, tetanus, influenza, rabies, typhoid, chickenpox, diphtheria, whooping cough, cervical cancer and many more.
It is also renowned for its manufacture and distribution of prescription medicines such as antibiotics and treatments for such ailments as asthma, HIV/AIDS, malaria, depression, migraines, diabetes, heart failure, and digestive disorders.
Perhaps GSK Plc’s fortunes may change if the company is able to obtain the parent company’s licence to manufacture GSK-owned vaccines and prescription medicines within the country while also exploring the possibility of extending the sale of its products outside the shores of the country.
Since different expertise is required for vaccines and prescription drug manufacture and distribution as compared to manufacture and sale of consumer healthcare products, perhaps another alternative may be for the company to create two separate companies with one company being a 100% vaccines and prescription drug pharmaceutical manufacturing and distribution company while the second company specializes entirely in the manufacture and sale of consumer healthcare products.
As a result of the Q1 2021 performance, the company’s earnings per share (EPS) dropped to -20 kobo compared to the 9 kobo earnings per share reported in Q1 2020. At the start of 2021, GSK Plc’s share price was ₦6.90 but the company has since lost over 10% of its price valuation as the company’s share price closed at ₦6.20 on April 30, 2021.
NB Plc’s share price and dividends keeping shareholders happy
It was not all hunky-dory for the company as its cost of sales jumped from N48.3 billion in Q1 2020 to N66 billion in Q1 2021.
Nigerian Breweries Plc (“NB Plc” or the “Company”) reported its first-quarter (Q1) 2021 results on April 23, 2021.
The company’s performance was impressive considering the headwinds it faced late in 2020 and early 2021 from inflationary pressures, poor consumer purchasing power, lethargic economic growth, and increase in the company’s beer prices which took effect from Q4 2020.
The company achieved a net revenue for the three months to March 31, 2021 of N105.68 billion compared to N83.23 billion for the same period to March 31, 2020 — a 27% increase compared to the Q1 2020 results.
It also achieved a N39.67 billion gross profit — a 13.7% increase in gross profit compared to Q1 2020.
Quarter-on-quarter EBITDA rose by 22.8% from N19.82 billion in Q1 2020 to N24.34 billion in Q1 2021. Other positive outcomes quarter on quarter were the increase in operating income (from N10.94 billion to N14.49 billion), profit before tax (from N8.3 billion to N11.51 billion), and profit after tax (from N5.53 billion to N7.66 billion).
It was not all hunky-dory for the company as its cost of sales (direct costs attributable to NB Plc’s production) jumped from N48.3 billion in Q1 2020 to N66 billion in Q1 2021, an increase of N17.7 billion. According to the company, its costs are subject to seasonal fluctuations as a result of weather conditions and festivities. As a result, the company’s results and volumes are dependent on the performance in the peak‐selling season, typically resulting in higher revenue and profitability in the last quarter of the year.
The total cost of sales, marketing and distribution, and administration expenses grew from N72.47 billion in Q1 2020 to N91.63 billion in Q1 2021 – a jump of 26.43%. This jump was largely attributable to the cost of raw materials and consumables which grew to N46.53 billion (compared to N30.2 billion for the same period in Q1 2020).
The raw materials cost pressure has been a trend since Q2 2020 driven by the rising commodity prices, foreign exchange devaluation and domestic inflationary pressures. As a result, the cost of the raw materials to net income ratio has continued to rise. This ratio was 36.3% in Q1 2020 but has risen to 44% in Q1 2021.
What may be a source of particular concern for the company is how well working capital is being managed from a liquidity and leverage perspective. The company reported cash and cash equivalents of N30.37 billion in Q1 2020, this had dropped to N18.43 billion by Q1 2021. In the same period, trade debtors and other receivables (i.e., those that owe the company for purchases that have not been paid for) had increased from N11.42 billion in Q1 2020 to N23.48 billion in Q1 2021, an increase of over 105% in just 12 months!
More worrying, in terms of magnitude, are trade creditors and other payables (i.e., those that the company owes payments for goods and services purchased) which grew from N139.2 billion in Q1 2020 to N145.41 billion in Q1 2021, a rise of N6.21 billion (or 4.5%) in just 12 months.
While the company’s loans and borrowings had reduced significantly (short-term loans in Q1 2021 was N35.65 billion versus N39.64 billion in Q1 2020; and long-term loans in Q1 2021 was N15.87 billion versus N51,81 billion in Q1 2020), the cost of borrowing, that is, interest expenses that the company paid on borrowed funds, rose from N2.7 billion in Q1 2020 to N3 billion in Q1 2021. This suggests that while short term and long-term borrowing have reduced, working capital needs are being refinanced at a higher cost or alternatively, most of the reduced short term or long-term borrowings have simply been restructured from longer-term loans to shorter-term overdrafts and commercial papers with a higher interest expense. The balance sheet as of Q1 2021 showed a liability in the form of bank overdraft and/or commercial papers of N21.44 billion which was not in the books in Q1 2020.
The first-quarter report also showed that as of March 31, 2021, the company had revolving credit facilities with five Nigerian banks to finance its working capital with the approved limit of the loan with each of the banks ranging from N6 billion to N15 billion (total N66 billion). N9 billion of the available amount was utilized at end of March 2021 (2020: Nil).
It should be noted that NB Plc’s financial statements for the 3 months ended 31st March 2021 are yet to be independently audited, so the results may be further improved or be worse, depending on the views and professional opinion of the external auditors in terms of accounting treatments and management judgement on significant transactions.
From the company’s numbers and explanations, the results are clearly driven by:
(1) Benefits from its increased pricing with the raised prices taking effect from December 10, 2020. The increases ranged from 5.2% to 6%, mainly on selected brands packaged in aluminium cans and on the 600-ml Star Larger returnable glass bottle.
(2) Volume growth in its premium brands (particularly Heineken) and non-alcoholic portfolio (particularly Maltina).
(3) Relative inelastic demand for its portfolio mix despite price increases, availability of substitutes, and stagnate consumer wages eroded by inflation. In economics, inelastic demand occurs when the demand for a product remains static or changes less than changes in price.
Overall, the company achieved outstanding results that would have confounded analysts’ estimates. Given continued inflationary trends and currency depreciation, it would be interesting to see whether turnover and profitability growth are sustainable over the remaining quarters of the year. On its financial year 2020 performance, the company paid a final dividend of NGN0.69 in April 2021 (interim of NGN0.25 paid in December 2020). If the trend is sustained, it can only be good news for NB Plc in terms of increases in its share price and dividends for its shareholders.
Heineken Brouwerijen B.V owns 37.73% of the company to which NB Plc pays annual technical service fees and royalties.
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