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New brands of local rice flood major markets, as prices of major items drop 

Latest Nairametrics Food Price Survey reveals more brands of local rice have now flooded major markets in the country helping to drive down prices of local rice.  

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OPINION: Development policies should focus on producers, not consumers

The local price of rice recorded a significant drop after weeks of price hikes following the closure of Nigerian land borders. Latest Nairametrics Food Price Survey reveals more brands of local rice have now flooded major markets in the country helping to drive down prices of local rice 

The latest household survey conducted by Nairametrics Research Team showed that some new brands of local rice now sell for as low as N17,000. Also, the prices of other items like round shaped tomatoes, bags of onions dropped from what was reported two weeks earlier.  

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Despite the price drops recorded, some major items such as palm oil, groundnut oil, and foreign rice increased in price. The report includes details on items that witnessed increasin price, items that reduced, special market/items as well as market insights. 

local, Rice will be abundant this Christmas, RFAN says

Items that recorded an increase in price 

  • A 50kg bag of Caprice increased by 0.16% to sell at an average of N26,167 compared to an initial N26,125. 
  • A big bag of Garri (Yellow) now sells for an average of N6,250 from an initial N6,125 indicating a 2.04% increase. 
  • The price of 5 litres of locally made palm oil spiked significantly by 14.9% as it now sells for an average of N2,125 from an initial average of N1,850. 
  • 25 litres of locally made palm oil also increased by 17.1% to sell at an average of N11,125 compared to N9,500. 
  • The price of locally made groundnut oil witnessed significant change, as the 25-litre gallon increased by 25% to sell at a current average of N13,125 from an initial N10,500. 

House hold survey

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Items that maintained initial price 

Below are the items that maintained initial prices over the past two weeks: 

  • Household cooking gas maintained the same price as recorded last time out; 12.5kg of gas cost an average of N3,900, while 5kg costs N1,525. 
  • The various noodle brands still sell for the same prices as they did two weeks ago. A carton of Indomie (Hungry man) sells for an average of N3,200, while Chikki (100g) sells for an average of N2,100. 
  • The price of 50kg bags of brown beans (Oloyin) and white beans still sell for an average of N13,000 and N21,250 respectively. 
  • A bag of Ijebu Garri and white Garri currently sell at an average of N6,700 and N6,125 respectively. 
  • Juice brands such as 5 Alive and Chivita cost an average of N500.

Items that recorded price reductions 

  • A 50kg bag of Royal Stallion rice reduced slightly by 1.56% to an average of N26,333 compared to a previous N26,750. 
  • The price of a big basket of round shaped tomatoes reduced by 10% as it now sells for N9,000 compared to an initial N10,000. 
  • The price of a medium and small basket of round shaped tomatoes also reduced by 14.3% and 33.3% to sell at N6,000 and N4,000 respectively. 
  • A big basket of oval-shaped tomatoes now costs N7,000 compared to an earlier cost of N8,000. This change indicates a 12.5% reduction in price, while a small basket of the same type of tomatoes reduced by 10% to sell at N4,500. 

Special Item/Markets 

Daleko market now has a new stock of locally made riceSome new brands of locally made rice in the market include “Arinze”, “Mama Emeka”, “Crown Gold”, “Big Bull”, “Patriot”, “Usir”, LGS” and many othersThese items sell between the range of N17,000 and N21,000. 

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As a follow up to an earlier report,  the price of a big bag of new onions crashed by 16.7% as it now sells for an average of N25,000, while a bag of dry onions now cost an average of N22,000, indicating 45% reduction.  

The price of maize still varies largely across various markets. However, a bag of yellow maize dropped significantly at Mile 12 market to sell at an average of N14,000 compared to N21,000 recorded two weeks ago. This change indicates a 33.3% decrease.  

[READ MORE: Prices of tomatoes, frozen foods, onions, others jump, as low demand hits imported rice]

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However, a bag of yellow maize continues to sell at N13,000 at the Mushin market while a bag of white maize costN11,500. 

Market Insights 

Poultry owners are stocking broiler chickens as they prepare to do the Christmas business. This is according to a chicken seller who suggested that the commodity is expected to slightly increase in price going into the Yuletide period. Meanwhile, layers are currently sold for N2,000 each while breeders sell for N5,000 each. Another brand of chicken called “Aguntan Ologan” is sold for an average of N4,000. 

Nairametrics Research also found out that the price of pepper dropped again in the last two weeks as it now sells for an average of N10,000 compared to N14,000 recorded last time.  The price of the item reduced by 28.6% within 15 days.

However, Mr. Babangida, a seller at Mile 12 market, enlightened the Research team, The price varies according to time. A bag of pepper was sold for an average of N11,000 in the morningwhile it costs N10,000 in the afternoon. 

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Commenting on the crash in the price of tomatoesmajor tomatoes trader in Mile 12 market said, The change in the price of tomatoes is not influenced by border closure, rather it is affected by supply in the market, as prices are easily raised when the commodity is not available. 

The price of tomatoes is not constant, it could sell at N15,000 tomorrow and drop to N6,000 the day after if there is a surplus supply of tomatoes in the market. 

Rice dealers at Daleko market confirmed to Nairametrics that there is no foreign rice currently in Nigerian markets. According to a major dealer, There are various brands of locally made rice, some of which are processed to the standard of imported rice while some are stony. The better quality sells for an average of N21,000 while the latter costs an average of N17,500. 

“The only issue is that many dealers now bag these locally made rice into foreign bags as a strategy for marketing, to attract customers to their shops. Retailers now sell local rice in place of foreign rice to consumers at the rate of foreign rice.” 

[READ ALSO: Household Survey: Nigerians dump imported rice, others, as prices jump high]

About Nairametrics Food Price Survey 

The Nairametrics Food Price Watch is a bi-weekly household market survey that covers the prices of major food items, with emphasis on five major markets in Lagos – Mushin Market, Daleko Market, Oyingbo Market, Idi-Oro Market and Mile 12. 

ItemsBrandUnitMUSHIN (05/12/2019)DALEKO (05/12/2019)OYINGBO (05/12/2019)MILE 12 (05/12/2019)Average MUSHIN (21/11/2019)DALEKO (21/11/2019)OYINGBO (21/11/2019)MILE 12 (21/11/2019)Average
Bag of RiceBasmati5kgNANANANANANANANANA
Bag of RiceMama Gold10kgNANANANANANANANANA
Bag of RiceRoyal Stallion50Kg27000NA270002500026333.3333333332800026000280002500026750
Bag of RiceRice Master10kgNANANANANANANANANANA
Bag of RiceMama Gold50kg22000205002200021000213752200020500220002100021375
Bag of RiceCaprice50kg26500NA270002500026166.6666666672650026000270002500026125
Bag of RiceMama's Pride50kg22000205002200021000213752200020500220002100021375
Bag of RiceFalcon25kgNANANANANANANANANANA
Bag of BeansOloyin50kg13000120001300014000130001300012000130001400013000
Bag of BeansWhite50kg22000200002200021000212502200020000220002100021250
Bag of BeansBrown>50kg24000220002400024000235002400022000240002400023500
Tuber of YamAbuja1 Big Size Tuber900800900800850900800900800850
Tuber of YamAbuja1 Medium Size Tuber650500650600600650600650600625
Carton of NoodlesIndomie305g (Belle full)2900290029002900290029002900290029002900
Carton of NoodlesIndomie200g (Hungry man)3200320032003200320032003200320032003200
Carton of NoodlesChikki100g2000220021002100210020002200210021002100
Carton of NoodlesMinimie70g1500150015001500150015001500150015001500
Carton of NoodlesGolden Penny70g1400140014001400140014001400140014001400
Bag of GarriIjebu80kg6000680070007000670060006800700070006700
Bag of GarriWhite50kg5500600065006500612555006000650065006125
Bag of GarriYellow50kg5500650065006500625055006000650065006125
Basket of PotatoSweetBig Basket4500450045004500
Basket of PotatoSweetSmall Basket700700700700
Basket of PotatosweetSmallest Basket200200200200
Basket of PotatoIrishBiggest Basket22000220002200022000
Basket of PotatoIrishMedium Basket2000200020002000
Basket of PotatoIrishSmall Basket1500150015001500
Packet of PastaGolden Penny500g4200420043004200422542004200430042004225
Packet of PastaDangote500g4000400040003900397540004000400039003975
Packet of PastaPower (1 pc)500g220220220200215220220220200215
Packet of PastaBonita (1 pc)500g220200200210207.5220200200210207.5
Gallon of Palm OilLocal5 Litres2200200023002000212520001700200017001850
Gallon of Palm OilLocal25 Litres1150011000115001050011125105009000950090009500
Gallon of Vegetable OilLocal5 Litres2300210024002200225020001900200020001975
Gallon of Vegetable OilLocal25 Litres140001250013500125001312512000950011000950010500
Gallon of Vegetable OilKings5 Litres3000300030003000300030003000300030003000
Gallon of Vegetable OilWesson5 Litres3900390039003900390039003900390039003900
Gallon of Vegetable OilMamador3.8 Litres25002450250024002462.525002450250024002462.5
Gallon of Vegetable OilPower3 Litres1800180018001800180018001800180018001800
Bunch of PlaintainPlaintain1 Big Bunch400400350400387.5400400350400387.5
Bag of FlourDangote50kg11200112001120011500112751120011200112001150011275
Bag of FlourHoney well50Kg11500112001120011200112751150011200112001120011275
Bag of FlourMama Gold50kg11500113001100011300112751150011300110001130011275
Bag of SugarDangote50kg3500320034003200332535003200340032003325
MilkPeak Powdered (Tin)400g12501200120012001212.512501200120012001212.5
Milkpeak Powdered(Tin)900g2400240024002300237524002400240023002375
MilkPeak milk (Refill)500g10501000100010001012.510501000100010001012.5
MilkDano Powdered (Tin)500g1000100010001000100010001000100010001000
MilkDano Powdered(Tin)900g2000200020002000200020002000200020002000
MilkDano (Refill)500g850800800800812.5850800800800812.5
MilkThreeCrown (Refill)380g720700750700717.5720700750700717.5
MilkLoya Powdered (Tin)400g10001000100010501012.510001000100010501012.5
MilkLoya (Refill)400g850800850800825850800850800825
MilkCoast (Refill)500g750750750750750750750750750750
Cocoa BeveragesMilo (Tin)500g10001100105010001037.510001100105010001037.5
Cocoa BeveragesMilo (Tin)900g2000210021002100207520002100210021002075
Cocoa BeveragesMilo Refill500g900900900900900900900900900900
Cocoa BeveragesBournvita Refill500g950900950900925950900950900925
Cocoa BeveragesBournvita (Plastic)900g2000200020002000200020002000200020002000
Cocoa BeveragesOvaltine Refill500g800800850850825800800850850825
Cocoa BeveragesOvaltine(Plastic)500g1100110010001100107511001100100011001075
CoffeeNescafe Classic50g600600600600600600600600600600
TeaLipton Yellow label52g310290300300300310290300300300
TeaTop tea52g300300300300300300300300300300
SugarSt' Loius Sugar(Cube) 500g400380400450407.5400380400450407.5
SugarGolden Penny Sugar (cube)500g350300350300325350300350300325
BreadVal-U1 loaf300300300300300300300300300300
BreadButterfield1 loaf300300300300300300300300300300
EggN/ACrate1000100010001000100010001000100010001000
Bottled Water (Refill)CwayRefill600600650600612.5600600650600612.5
Juice5 Alive1 litre600550550600575600550550600575
JuiceChivita1 litre600550600550575600550600550575
GasRefilling12.5kg4000380040003800390040003800400038003900
GasRefilling5kg1500160015001500152515001600150015001525
TomatoesBig Basketround shaped900090001000010000
Medium Basketround shaped6000600070007000
Small Basketround shaped4000400060006000
Big BasketOval Shaped7000700080008000
Small BasketOval Shaped4500450050005000
FishKote (Horse Mackerel)1 kg500450480450470500450480450470
FishTitus (Mackerel)1 kg500480500490492.5500480500490492.5

Patricia

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Blurb

Why Insurance firms are selling off their PFAs

It has not been uncommon over the years to have insurance companies with pension subsidiaries.

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Why Insurance firms are selling off their PFAs

The idea of mitigating risks and curtailing losses at the bare minimum begins from the insurance industry and only crosses into the pension space with the need for retirement planning. For this reason, it has not been uncommon over the years to have insurance companies with pension subsidiaries. However, controlling the wealth of people is no easy feat – and crossover companies are beginning to think it might not be worth it competing with the big guns; that is, the pension fund administrators (PFAs) that already cater to the majority of Nigerians.

A few months ago, AXA Mansard Insurance Plc announced that its shareholders have approved the company’s plan to sell its pension management subsidiary, AXA Mansard Pensions Ltd, as well as a few undisclosed real estate investments. It did not provide any reason for the divestment. More recently, AIICO Insurance Plc also let go of majority ownership in its pension arm, AIICO Pension Managers Ltd. FCMB Pensions Ltd announced its plans to acquire 70% stakes in the pension company, while also acquiring an additional 26% stake held by other shareholders, ultimately bringing the proposed acquisition to a 96% stake in AIICO Pension. The reason for the sell-off by AIICO does not also appear to be attributed to poor performance as the group’s profit in 2019 had soared by 88% driven by growth across all lines of business within the group.

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 So why are they selling them off? 

Pension Fund Administration is, no doubt, a competitive landscape. Asides the wealth of the over N10 trillion industry, there is also the overarching advantage that pension contributors do not change PFAs regularly. Therefore, making it hard to compete against the big names and industry leaders that have been in the game for decades – the kinds of Stanbic IBTC, ARM, Premium Pension, Sigma, and FCMB. Of course, the fact that PFAs also make their money through fees means the bigger the size, the more money you make. With pressure to capitalize mounting, insurance firms will most likely spin off as they just don’t have the right focus, skills, and talents to compete.

The recent occurrence of PENCOM giving contributors the opportunity to switch from one PFA to another might have seemed like the perfect opportunity for the smaller pension companies to increase their market shares by offering better returns. More so, with the introduction of more aggrieved portfolios in the multi-fund structure comprising of RSA funds 1, 2, & 3, PFAs can invest in riskier securities and enhance their returns. However, the reality of things is that the smaller PFAs don’t have what it takes to effectively market to that effect. With the gains being made from the sector not particularly extraordinary, it is easier for them to employ their available resources into expanding their core business. There is also the fact that their focus now rests on meeting the new capital requirements laced by NAICOM. Like Monopoly, the next smart move is to sell underperforming assets just to keep their head above water.

READ MORE: AIICO seeks NSE’s approval for conducting Rights Issue

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Olasiji Omotayo, Head of Risk in a leading pension fund administrator, explained that “Most insurance businesses selling their pension subsidiaries may be doing so to raise funds. Recapitalization is a major challenge now for the insurance sector and the Nigerian Capital Market may not welcome any public offer at the moment. Consequently, selling their pension business may be their lifeline at the moment. Also, some may be selling for strategic reasons as it’s a business of scale. You have a lot of fixed costs due to regulatory requirements and you need a good size to be profitable. If you can’t scale up, you can also sell if you get a good offer.”

What the future holds

With the smaller PFAs spinning off, the Pension industry is about to witness the birth of an oligopoly like the Tier 1 players in the Banking sector. Interestingly, the same will also happen with Insurance. The only real issue is that we will now have limited choices. In truth, we don’t necessarily need many of them as long all firms remain competitive. But there is the risk that the companies just get comfortable with their population growth-induced expansion while simply focusing on low-yielding investments. The existence of the pandemic as well as the really low rates in the fixed-income market is, however, expected to propel companies to seek out creative ways to at least keep up with the constantly rising rate of inflation.

 

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Patricia
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Nigerian Banks expected to write off 12% of its loans in 2020 

The Nigerian banking system has been through two major asset quality crisis.

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Nigerian Banks expected to write off 12% of its loans in 2020 

The Nigerian Banking Sector has witnessed a number of asset management challenges owing largely to macroeconomic shocks and, sometimes, its operational inefficiencies in how loans are disbursedRising default rates over time have led to periodic spikes in the non-performing loans (NPLs) of these institutions and it is in an attempt to curtail these challenges that changes have been made in the acceptable Loan to Deposit (LDR) ratios, amongst others, by the apex regulatory body, CBN. 

Projections by EFG Hermes in a recent research report reveal that as a result of the current economic challenges as well as what it calls “CBN’s erratic and unorthodox policies over the past five years,” banks are expected to write off around 12.3% of their loan books in constant currency terms between 2020 and 2022the highest of all the previous NPL crisis faced by financial institutions within the nation.  

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Note that Access Bank, FBN Holdings, Guaranty Trust Bank, Stanbic IBTC, United Bank for Africa and Zenith Bank were used to form the universe of Nigerian banks by EFG Hermes.  

READ MORE: What banks might do to avoid getting crushed by Oil & Gas Loans

Background  

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Over the past twelve years, the Nigerian banking system has been through two major asset quality crisisThe first is the 2009 to 2012 margin loan crisis and the other is the 2014 to 2018 oil price crash crisis 

The 2008-2012 margin loan crisis was born out of the lending institutions giving out cheap and readily-available credit for investments, focusing on probable compensation incentives over prudent credit underwriting strategies and stern risk management systems. The result had been a spike in NPL ratio from 6.3% in 2008 to 27.6% in 2009. The same crash in NPL ratio was witnessed in 2014 as well as a result of the oil price crash of the period which had crashed the Naira and sent investors packing. The oil price crash had resulted in the NPL ratio spiking from 2.3% in 2014 to 14.0% in 2016.  

Using its universe of banks, the NPL ratio spiked from an average of 6.1% in 2008 to 10.8% in 2009 and from 2.6% in 2014 to 9.1% in 2016. During both cycles, EFG Hermes estimated that the banks wrote-off between 10-12% of their loan book in constant currency terms.  

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 READ MORE: Ratings firm explains why bank non-performing loans could be worse than expected

The current situation 

Given the potential macro-economic shock with real GDP expected to contract by 4%, the Naira-Dollar exchange rate expected to devalue to a range of 420-450, oil export revenue expected to drop by as much as 50% in 2020 and the weak balance sheet positions of the regulator and AMCON, the risk of another significant NPL cycle is high. In order to effectively assess the impact of these on financial institutions, EFG Hermes modelled three different asset-quality scenarios for the banks all of which have their different implications for banks’ capital adequacy, growth rates and profitability.  These cases are the base case, lower case, and upper case. 

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Base Case: The company’s base case scenario, which they assigned a 55% probability, the average NPL ratio and cost of risk was projected to increase from an average of 6.4% and 1.0% in 2019 to 7.6% and 5.3% in 2020 and 6.4% and 4.7% in 20201, before declining to 4.9% and 1.0% in 2024, respectively. Based on its assumptions, they expect banks to write-off around 12.3% of their loan books in constant currency terms between 2020 and 2022a rate that is marginally higher than the average of 11.3% written-off during the previous two NPL cycles. Under this scenario, estimated ROE is expected to plunge from an average of 21.8% in 2019 to 7.9% in 2020 and 7.7% in 2021 before recovering to 18.1% in 2024.  

Lower or Pessimistic Case: In its pessimistic scenario which has a 40% chance of occurrencethe company projects that the average NPL ratio will rise from 6.4% in 2019 to 11.8% in 2020 and 10.0% in 2021 before moderating to 4.9% by 2024It also estimates that the average cost of risk for its banks will peak at 10% in 2020 and 2021, fall to 5.0% in 2022, before moderating from 2023 onwards. Under this scenario, banks are expected to write off around as much as 26.6% of their loan books in constant currency terms over the next three years. Average ROE of the banks here is expected to drop to -8.8% in 2020, -21.4% in 2021 and -2.9% in 2022, before increasing to 19.7% in 2024.   

Upper or optimistic case: In a situation where the pandemic ebbs away and macro-economic activity rebounds quicklythe optimistic or upper case will hold. This, however, has just a 5% chance of occurrence. In this scenario, the company assumes that the average NPL ratio of the banks would increase from 6.4% in 2019 to 6.8% in 2020 and moderate to 4.8% by 2024Average cost of risk will also spike to 4.2% in 2020 before easing to 2.4% in 2021 and average 0.9% thereafter through the rest of our forecast period. Finally, average ROE will drop to 11.6% in 2020 before recovering to 14.4% in 2021 and 19.0% in 2024. 

With the highest probabilities ascribed to both the base case and the pessimistic scenario, the company has gone ahead to downgrade the rating of the entire sector to ‘Neutral’ with a probability-weighted average ROE (market cap-weighted) of 13.7% 2020 and 2024. The implication of the reduced earnings and the new losses from written-off loans could impact the short to medium term growth or value of banking stocks. However, in the long term, the sector will revert to the norm as they always do.   

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Even with a 939% jump in H1 Profit, Neimeth still needs to build consistency

Neimeth has been one of the better performers in the stock market in the last one year. 

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Even with a 939% jump in H1 profit, Neimeth still needs to build consistency 

Neimeth’s profit after tax for H1 2020 might have jumped by 939% from H1 2019, but there’s still so much the company needs to do to remain in the game. 

For the first time in years, Pharmaceutical companies across the globe are in the spotlight for a good reason.  As the COVID-19 pandemic rages on, the world waits patiently for this industry to produce a vaccine that can once again lead us back to the lives we all missed. Nigeria is also not an exception, it seems. One of Nigeria’s oldest pharmaceutical companies, Neimeth, has been one of the better performers in the stock market in the last one year. However, there is still so much the company needs to do to earn profits consistently. 

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READ MORE: Covid-19: List of pharmaceutical firms that will receive grants from the CBN

Neimeth’s recently released H1 2020 results show a jump of 19.4% in revenue from 976 million earned in H1 2019 to 1.165 billion in H1 2020. While this is impressive, its comparative Q2 results (Jan-March ‘ 20) show a drop in revenue of 25.4% from 748.8 million earned in Q2 2019, to the 568.7 million revenue in Q2 2020. In similar vein, while its profit-after-tax soared by 939% from 5.447 million in H1 2019 to 56.596 million in H1 2020, its quarter-by-quarter results show a drop of 118%. While there is a truth that some months are better performers than others, Neimeth’s extreme profit jump in the half-year results juxtaposed with the more-than-100% drop in the first quarter of this year, reveal wide-gap volatility in its earning potential. Its revenue breakdown attributes the quarter-by-quarter drop in revenue to a comparative drop in its ‘Animal Health’ product line by a whopping 897.42%. The ‘Pharmaceuticals’ line also only experienced a marginal jump of 2.57%. 

Full report here. 

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READ MORE: Nigeria records debt service to revenue ratio of 99% in first quarter of 2020.

Current & Post-Covid-19 Opportunities  

A 2017 PWC report had revealed that by 2020 the pharmaceutical market is expected to “more than double to $1.3 trillion. Mckinsey had also predicted that come 2026, Nigeria’s pharma market could reach $4 billion. The positive outlook of the industry is even more so, following the disclosure by the CBN to support critical sectors of the economy with 1.1 trillion intervention fund.  

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The CBN governor, Godwin Emefiele, had stated that about 1trillion of the fund would be used to support the local manufacturing sector while also boosting import substitution while the balance of 100 billion would be used to support the health authorities towards ensuring that laboratories, researchers and innovators are provided with the resources required to patent and produce vaccines and test kits in Nigeria. 

READ MORE: Airtel to acquire additional spectrum for $70 million 

While manufacturing a vaccine for the Covid-19 pandemic might be nothing short of wishful, the pandemic presents a global challenge that businesses in the healthcare industry could leverage. Through strategic R&D, it could uncover a range of solutions, particularly those that involve the infusion of locally-sourced raw materials.  

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In order for the company to attain sustainable growth, it needs to come up with structures and systems that are dependable, while also tightening loose ends. One of such loose ends is its exposure to credit risk. It’s Q2 2020 reports reveal value for lost trade receivables of N693.6 million carried forward from 2019. To this end, it notes that while its operations expose it to a number of financial risks, it has put in place a risk management programme to protect the company against the potential adverse effects of these financial risks. 

At the company’s last annual general meeting (AGM), the managing director, Matthew Azoji, had also spoken on the company’s efforts to gain a larger market share through its initiation of bold and gradual expansion strategies.  

The total revenue growth and profitability of the half-year period undoubtedly signals a potential in the company. However, we might have to wait for the company’s strategies to crystalize and attain a level of consistency for an extended period before reassessing the long-term lucrativeness of its stock or otherwise. That said, it certainly should be on your watchlist.  

Patricia
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