Owning a successful bank is not a mean feat for anybody to achieve, and owning one while being in one’s early 30s makes it even more exceptional. It takes grit, ambition and business acumen to pull off such an achievement, and these are all traits that Fola Adeola had in excess when he established his bank in the late 80s.
In this week’s Founder’s Profile, we bring you Fola Adeola, the serial entrepreneur who co-founded Guaranty Trust Bank (GTBank).
Born into a large family in 1954, Fola Adeola did not have a privileged childhood. Even though his father was a bank clerk at the time, his income was not enough to go round providing 17 children their necessities.
To supplement the family income, his mother would send him and his brothers to join her in hawking wares on the streets of Surulere, where they lived. While this was not the childhood many would have asked for, young Fola did not allow it go to waste but used it to develop his character and business skills.
He attended St Paul’s School, Breadfruit and Methodist Boys High School in Lagos, before moving to obtain a Diploma in Accounting from Yaba College of Technology in 1975.
He had his trainings at Deloitte, Haskins and Sells and D.O. Dafinone & Company (both Chartered Accounting firms) and became a Chartered Accountant in 1980. He has since then received other professional development trainings at notable institutions including Harvard Business School, INSEAD, and the International Institute for Management Development in Switzerland.
He served as Senior Auditor at D.O. Dafinone & Co. before joining NAL Merchant Bank in 1982 as a Manager. In 1986, he moved to Continental Merchant Bank Limited as Deputy General Manager & Divisional Head, Financial Services Division.
It was at this time that he moved to Ikoyi with his colleague and childhood friend, Adetayo Aderinokun, who was also a staff at Continental Merchant Bank.
Barber by necessity
No business thrives better than one set up for the purpose of meeting needs, and Fola was quite conscious of this. As a new resident at Ikoyi, the first challenge he had was getting a place to cut his hair. Along with other professionals residing in the environ, they had to commute to the mainland to get a haircut.
Though this was largely inconvenient, the need to solve a problem did not bore a deep hole in Tayo’s heart until he witnessed a fatal accident on the Eko bridge, one Sunday afternoon.
“The only thing that came to my mind was whether the victim of that accident was also on his way to the barbers! I decided then that we would put barbers in Ikoyi,” he later wrote in his tribute to Tayo Aderinokun.
The two friends pooled funds together and in no time, they put the first barbing salon in Ikoyi – Finishing Touches Barbing salon. Running the salon together, Fola and Tayo discovered they had a similar appetite for business risks.
Years later, Fola and Tayo decided to sell off the barbing salon so that they could concentrate on the infant Guaranty Trust Bank.
As Fola recalled, “One of the terms of the sale was that Tayo, myself, and all our male children, would cut our hair for free, forever!”
Funny clause, you might think, but that said a lot about their shrewd business skills.
When Tayo was heading a branch of the bank in Kano, Fola paid him a visit, and together they decided to arrest the problem of a members-only gym. However, this dream could not materialize as planned. They rented a property and set out to remodel it, but when after two weeks, the landlord could no longer recognize his property, he raised an alarm and the two friends had to look for the money to restore the property to its former condition.
It was a colossal loss for them. With much less loss, some other person may have given up on the entrepreneurial journey, but not Fola. The die-hard businessman in him was ready to make losses if need be, but he was not ready to give up on it.
By the time Tayo returned to Lagos from Kano, Fola was ready to revisit the topic of starting a bank. It was a discussion they had had in the past, but were yet to take action on.
In a recent interview, he noted that a deeper realization of readiness occurred when he received a couple of offers from others seeking to get a banking license. It was a point where he asked himself, why he had to go run a bank to fulfill another person’s vision, rather than his.
Fola Adeola and Tayo Aderinokun were both qualified to run a bank individually, but going together meant that there were less chances of failure. They applied for a banking license and set about rallying the needed capital.
“For me, the idea of a commercial bank never died. I revisited it with Tayo, and told him I was now prepared to go ahead, as I felt the window of opportunity for a licence was narrowing. This was in January 1989. Fortunately, he agreed, and the rest is now history,” Fola later wrote.
They brought about 40 friends into the venture, most of whom were in their thirties and working for different organisations. The likes of Femi Pedro, Akin Akintoye, Gbolade Osibodu, Bode Agusto, and Moses Ochu were involved in the project.
Fola was 34 and Tayo was 33, as at 1988 when they applied for the banking licence. It took countless meetings in Fola’s residence, and later in Tayo’s First Marina Trust office in Victoria Island before they raised the required capital.
August 2, 1990, the duo received the banking licence No. 58, dated August 1, 1990, and signed by the then Federal Minister for Finance, Chief Olu Falae, for Guaranty Trust Bank Limited. Femi Pedro recounted in his 2015 article The Curious Case of Young Generations, “A group of young boys in their early/mid 30s OWNED a bank! We simply dreamt big, and turned this dream into reality.”
The bank broke even in record time, and was listed on the Nigerian stock exchange in 1996.
On July 31, 2002, Adeola voluntarily retired from Guaranty Trust Bank, after 12 years, handing over to his friend and partner, Tayo Aderinokun.
18 years later, he would say, “My joy is that in my lifetime, an organization that I birthed, can stand on its own without any input from me or my partners. That means that in some decades, someone can say, GT Bank since 1990, and 1990 would sound to them the way 1550 sounds to us now”.
— FATE Foundation (@FATEFoundation) July 15, 2020
While still at the bank, Adeola in 2000 established a non-governmental organization, the FATE Foundation. The aim was to encourage entrepreneurship, using a mix of training, mentoring, loan support and consulting to support young Nigerians.
As part of its activities, the organisation opened an innovation centre in Abeokuta, the Institute for Venture Design, in collaboration with the Centre for Design Research at Stanford University. It now runs an entrepreneurship program focused on engineering, technology, and innovation, and which aims to promote development of industry in Nigeria.
In the last two decades, the FATE foundation has served over 30,000 young Nigerian entrepreneurs, with over 65% fully employed by their businesses and employing an average of four staff.
Since retiring from the bank, he has headed the boards of several companies including Arm Holdings, Lotus Capital (where his wife Hajara Adeola is MD/CEO), Eterna Oil, CardinalStone Partners Limited, UTC, Credit Registry Services and MainOne Cable Company Limited.
Fola Adeola also served as board member with Tafsan Breweries and is a member of the Governing Council of Lagos State University.
In public service, Adeola’s activities are quite notable, and this has formed a major part of his activities since he left GT Bank.
He was the Chairman of Lagos State Disaster Relief Committee, a team set up as a result of the January 27, 2002, Lagos bomb explosion, and also a member of the Solid Minerals Committee and the Chairman of Ogun State Development Trust Fund Committee.
Adeola served as a member of the Global Advisory Committee on Philanthropy of the World Economic Forum for four years. In 2001, he was invited to join twenty-four other business leaders for the Aspen Institute ISIB Annual Business Leaders Dialogue in Aspen, Colorado. In May 2004, he was appointed Commissioner on the Commission for Africa by the British Prime Minister Tony Blair.
In 1999, Mr. Adeola was awarded membership of the National Institute of Policy & Strategic Studies (MNI) in Kuru, Jos, after completing a one-year sabbatical at the institute. He is a Fellow of the Institute of Chartered Accountants of Nigeria and Fellow of the Institute of Directors of Nigeria.
He was the Vice Presidential running mate of the Action Congress of Nigerian (ACN) in the 2011 presidential election alongside the party’s presidential candidate, Mallam Nuhu Ribadu.
Fola Adeola has bagged several awards and recognitions including the distinguished Officer of the Order of the Federal Republic (OFR).
Nigerians borrow N3.34 trillion in one year – CBN
The document stated that the credit was stimulated by the policy on Loan-to-Deposit Ratio (LDR).
The total gross domestic credit in Nigeria increased from N15.56 trillion in May 2019 to N18.90 trillion as at June 2020. This was disclosed by the Central Bank of Nigeria via a communique issued on Thursday.
The document, which included the personal statements of members of the apex bank’s Monetary Policy Committee (MPC), stated that the credit was stimulated by the policy on Loan-to-Deposit Ratio (LDR).
— Central Bank of Nigeria (@cenbank) August 13, 2020
Drivers of the credit
Kingsley Obiora, Deputy Governor, CBN, explained that the credits were driven especially by demands from the manufacturing sector, consumer credit, general commerce, information and communication, and agriculture, among others. He said:
“Under the circumstances, the financial system has maintained a sound and stable position, following effective interventions by the CBN.
“Short-term interest rates continue to suggest some surfeit in the system with average Open Buy Back (OBB) and inter-bank call rates rising to 5.75 and 11.31 percent in June 2020, from 5.22 and 5.80% in May 2020, respectively.
“Non-performing loans (NPLs) decreased to 6.4% at the end of June 2020, compared to 9.4 percent in the corresponding period of 2019, reflecting recoveries, write-offs and disposals.”
He, however, added that despite the improvements, the economy continued to face significant headwinds to a robust recovery, as the number of COVID-19 cases exceeded 36,000 cumulatively, and continued to rise.
“The headline inflation rate increased slightly to 12.56% in June from 12.40% in May, with food inflation at 15.18%.
“Furthermore, 87% of households owning non-farm businesses have highlighted difficulties in raising money for their enterprises,” he added.
Obiora stated that it was clear that the economy faced an uncertain path, with long-lasting consequences for the livelihoods of many.
The decisive efforts of governments and central banks across the world have provided a strong foundation for the current recovery. However, it would be remiss to assume that the crisis is now over, especially as there remain many unknowns regarding the virus.
COVID-19 Update in Nigeria
On the 13th of August 2020, 373 new confirmed cases and 10 deaths were recorded in Nigeria.
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increase as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 48,116 confirmed cases.
On the 13th of August 2020, 373 new confirmed cases and 10 deaths were recorded in Nigeria, having carried out a total daily test of 3,337 samples across the country.
To date, 48,116 cases have been confirmed, 34,309 cases have been discharged and 966 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 341,421 tests have been carried out as of August 13th, 2020 compared to 338,084 tests a day earlier.
COVID-19 Case Updates- 13th August 2020,
- Total Number of Cases – 48,118
- Total Number Discharged – 34,309
- Total Deaths – 966
- Total Tests Carried out – 341,421
According to the NCDC, the 373 new cases were reported from 20 states- Lagos (69), Osun (41), Kaduna (40), Oyo (40), FCT (35), Plateau (22), Rivers (19), Kano (17), Ondo (17), Ogun (15), Abia (14), Gombe (12), Imo (9), Enugu (7), Kwara (6), Delta (5), Niger (2), Borno (1), Bauchi (1) and Nasarawa (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 16,256, followed by Abuja (4,632), Oyo (2,935), Edo (2,399), Rivers (1,991), Kaduna (1,706),Plateau (1,665), Kano (1,661), Delta (1,626), Ogun (1,521), Ondo (1,373), Enugu (976), Ebonyi (908), Kwara (888), Katsina (746), Osun (719), Borno (698), Abia (677), Gombe (647), and Bauchi (580).
Imo State has recorded 494 cases, Benue (430), Nasarawa (372), Bayelsa (346), Jigawa (322), Akwa Ibom (241), Niger (228), Ekiti (194), Adamawa (185), Anambra (156), Sokoto (154), Kebbi (90), Taraba (78), Zamfara (77), Cross River (73), Yobe (67), while Kogi state has recorded 5 cases only.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.
|Date||Confirmed case||New cases||Total deaths||New deaths||Total recovery||Active cases||Critical cases|
|August 13, 2020||48116||373||966||10||34309||12841||7|
|August 12, 2020||47743||453||956||0||33943||12844||7|
|August 11, 2020||47290||423||956||6||33609||12725||7|
|August 10, 2020||46867||290||950||5||33346||12571||7|
|August 9, 2020||46577||437||945||3||33186||12446||7|
|August 8, 2020||46140||453||942||6||33044||12154||7|
|August 7, 2020||45687||443||936||6||32637||12114||7|
|August 6, 2020||45244||354||930||3||32430||11884||7|
|August 5, 2020||44890||457||927||17||32165||11798||7|
|August 4, 2020||44433||304||910||14||31851||11672||7|
|August 3, 2020||44129||288||896||8||20663||22570||7|
|August 2, 2020||43841||304||888||5||20308||22645||7|
|August 1, 2020||43537||386||883||4||20287||22567||7|
|July 31, 2020||43151||462||879||1||19565||22707||7|
|July 30, 2020||42689||481||878||5||19270||22541||7|
|July 29, 2020||42208||404||873||5||19004||22331||7|
|July 28, 2020||41804||624||868||8||18764||22172||7|
|July 27, 2020||41180||648||860||2||18203||22117||7|
|July 26, 2020||40532||555||858||2||17374||22300||7|
|July 25, 2020||39977||438||856||11||16948||22173||7|
|July 24, 2020||39539||591||845||12||16559||22135||7|
|July 23, 2020||38948||604||833||20||16061||22054||7|
|July 22, 2020||38344||543||813||8||15815||21716||7|
|July 21, 2020||37801||576||805||4||15677||21319||7|
|July 20, 2020||37225||562||801||12||15333||21091||7|
|July 19, 2020||36663||556||789||11||15105||20769||7|
|July 18, 2020||36107||653||778||6||14938||20391||7|
|July 17, 2020||35454||600||772||3||14633||20049||7|
|July 16, 2020||34854||595||769||9||14292||19793||7|
|July 15, 2020||34259||643||760||6||13999||19500||7|
|July 14, 2020||33616||463||754||10||13792||19070||7|
|July 13, 2020||33153||595||744||4||13671||18738||7|
|July 12, 2020||32558||571||740||16||13447||18371||7|
|July 11, 2020||31987||664||724||15||13103||18160||7|
|July 10, 2020||31323||575||709||20||12795||17819||7|
|July 9, 2020||30748||499||689||5||12546||17513||7|
|July 8, 2020||30249||460||684||15||12373||17192||7|
|July 7, 2020||29789||503||669||15||12108||17012||7|
|July 6, 2020||29286||575||654||9||11828||16804||7|
|July 5, 2020||28711||544||645||11||11665||16401||7|
|July 4, 2020||28167||603||634||6||11462||16071||7|
|July 3, 2020||27564||454||628||12||11069||15867||7|
|July 2, 2020||27110||626||616||13||10801||15693||7|
|July 1, 2020||26484||790||603||13||10152||15729||7|
|June 30, 2020||25694||561||590||17||9746||15358||7|
|June 29, 2020||25133||566||573||8||9402||15158||7|
|June 28, 2020||24867||490||565||7||9007||14995||7|
|June 27, 2020||24077||779||558||4||8625||14894||7|
|June 26, 2020||23298||684||554||5||8253||14491||7|
|June 25, 2020||22614||594||549||7||7822||14243||7|
|June 24, 2020||22020||649||542||9||7613||13865||7|
|June 23, 2020||21371||452||533||8||7338||13500||7|
|June 22, 2020||20919||675||525||7||7109||13285||7|
|June 21, 2020||20242||436||518||12||6879||12847||7|
|June 20, 2020||19808||661||506||19||6718||12584||7|
|June 19, 2020||19147||667||487||12||6581||12079||7|
|June 18, 2020||18480||745||475||6||6307||11698||7|
|June 17, 2020||17735||587||469||14||5967||11299||7|
|June 16, 2020||17148||490||455||31||5623||11070||7|
|June 15, 2020||16658||573||424||4||5349||10885||7|
|June 14, 2020||16085||403||420||13||5220||10445||7|
|June 13, 2020||15682||501||407||8||5101||10174||7|
|June 12, 2020||15181||627||399||12||4891||9891||7|
|June 11, 2020||14554||681||387||5||4494||9673||7|
|June 10, 2020||13873||409||382||17||4351||9140||7|
|June 9, 2020||13464||663||365||4||4206||8893||7|
|June 8, 2020||12801||315||361||7||4040||8400||7|
|June 7, 2020||12486||260||354||12||3959||8173||7|
|June 6, 2020||12233||389||342||9||3826||8065||7|
|June 5, 2020||11844||328||333||10||3696||7815||7|
|June 4, 2020||11516||350||323||8||3535||7646||7|
|June 3, 2020||11166||348||315||1||3329||7522||7|
|June 2, 2020||10819||241||314||15||3239||7266||7|
|June 1, 2020||10578||416||299||12||3122||7157||9|
|May 31, 2020||10162||307||287||14||3007||6868||7|
|May 30, 2020||9855||553||273||12||2856||6726||7|
|May 29, 2020||9302||387||261||2||2697||6344||7|
|May 28, 2020||8915||182||259||5||2592||6064||7|
|May 27, 2020||8733||389||254||5||2501||5978||7|
|May 26, 2020||8344||276||249||16||2385||5710||7|
|May 25, 2020||8068||229||233||7||2311||5524||7|
|May 24, 2020||7839||313||226||5||2263||5360||7|
|May 23, 2020||7526||265||221||0||2174||5131||7|
|May 22, 2020||7261||245||221||10||2007||5033||7|
|May 21, 2020||7016||339||211||11||1907||4898||7|
|May 20, 2020||6677||284||200||8||1840||4637||7|
|May 19, 2020||6401||226||192||1||1734||4475||7|
|May 18, 2020||6175||216||191||9||1644||4340||7|
|May 17, 2020||5959||388||182||6||1594||4183||7|
|May 16, 2020||5621||176||176||5||1472||3973||7|
|May 15, 2020||5445||288||171||3||1320||3954||4|
|May 14, 2020||5162||193||168||3||1180||3815||4|
|May 13, 2020||4971||184||164||6||1070||3737||4|
|May 12, 2020||4787||146||158||6||959||3670||4|
|May 11, 2020||4641||242||152||10||902||3589||4|
|May 10, 2020||4399||248||142||17||778||3479||4|
|May 9, 2020||4151||239||127||11||745||3278||4|
|May 8, 2020||3912||386||118||10||679||3115||4|
|May 7, 2020||3526||381||108||4||601||2818||4|
|May 6, 2020||3145||195||104||5||534||2507||1|
|May 5, 2020||2950||148||99||5||481||2370||4|
|May 4, 2020||2802||245||94||6||417||2291||2|
|May 3, 2020||2558||170||88||2||400||2070||2|
|May 2, 2020||2388||220||86||17||351||1952||2|
|May 1, 2020||2170||238||69||10||351||1751||2|
|April 30, 2020||1932||204||59||7||317||1556||2|
|April 29, 2020||1728||196||52||7||307||1369||2|
|April 28, 2020||1532||195||45||4||255||1232||2|
|April 27, 2020||1337||64||41||0||255||994||2|
|April 26, 2020||1273||91||41||5||239||994||2|
|April 25, 2020||1182||87||36||3||222||925||2|
|April 24, 2020||1095||114||33||1||208||855||2|
|April 23, 2020||981||108||32||3||197||753||2|
|April 22, 2020||873||91||29||3||197||648||2|
|April 21, 2020||782||117||26||3||197||560||2|
|April 20, 2020||665||38||23||1||188||466||2|
|April 19, 2020||627||86||22||2||170||436||2|
|April 18, 2020||541||48||20||2||166||356||2|
|April 17, 2020||493||51||18||4||159||317||2|
|April 16, 2020||442||35||13||1||152||277||2|
|April 15, 2020||407||34||12||1||128||267||2|
|April 14, 2020||373||30||11||1||99||263||2|
|April 13, 2020||343||20||10||0||91||242||2|
|April 12, 2020||323||5||10||0||85||228||2|
|April 11, 2020||318||13||10||3||70||238||2|
|April 10, 2020||305||17||7||0||58||240||2|
|April 9, 2020||288||14||7||1||51||230||2|
|April 8, 2020||274||22||6||0||44||226||2|
|April 7, 2020||254||16||6||1||44||204||2|
|April 6, 2020||238||6||5||0||35||198||2|
|April 5, 2020||232||18||5||1||33||194||2|
|April 4, 2020||214||5||4||0||25||185||0|
|April 3, 2020||209||25||4||2||25||180||0|
|April 2, 2020||184||10||2||0||20||162||0|
|April 1, 2020||174||35||2||0||9||163||0|
|March 31, 2020||139||8||2||0||9||128||0|
|March 30, 2020||131||20||2||1||8||121||0|
|March 29, 2020||111||22||1||0||3||107||0|
|March 28, 2020||89||19||1||0||3||85||0|
|March 27, 2020||70||5||1||0||3||66||0|
|March 26, 2020||65||14||1||0||2||62||0|
|March 25, 2020||51||7||1||0||2||48||0|
|March 24, 2020||44||4||1||0||2||41||0|
|March 23, 2020||40||10||1||1||2||37||0|
|March 22, 2020||30||8||0||0||2||28||0|
|March 21, 2020||22||10||0||0||1||21||0|
|March 20, 2020||12||4||0||0||1||11||0|
|March 19, 2020||8||0||0||0||1||7||0|
|March 18, 2020||8||5||0||0||1||7||0|
|March 17, 2020||3||1||0||0||0||3||0|
|March 16, 2020||2||0||0||0||0||2||0|
|March 15, 2020||2||0||0||0||0||2||0|
|March 14, 2020||2||0||0||0||0||2||0|
|March 13, 2020||2||0||0||0||0||2||0|
|March 12, 2020||2||0||0||0||0||2||0|
|March 11, 2020||2||0||0||0||0||2||0|
|March 10, 2020||2||0||0||0||0||2||0|
|March 9, 2020||2||1||0||0||0||2||0|
|March 8, 2020||1||0||0||0||0||1||0|
|March 7, 2020||1||0||0||0||0||1||0|
|March 6, 2020||1||0||0||0||0||1||0|
|March 5, 2020||1||0||0||0||0||1||0|
|March 4, 2020||1||0||0||0||0||1||0|
|March 3, 2020||1||0||0||0||0||1||0|
|March 2, 2020||1||0||0||0||0||1||0|
|March 1, 2020||1||0||0||0||0||1||0|
|February 29, 2020||1||0||0||0||0||1||0|
|February 28, 2020||1||1||0||0||0||1||0|
2020 Q2 Analysis: Conoil Plc, hanging by the thread
Conoil must stay aware and strive in Q3 to maintain a positive net cash position.
A profit decline worth over N600 million within a 1-year period is more than enough to throw any concerned shareholder in a frenzy. Sadly, this is the reality for Conoil Plc, according to its latest unaudited earnings report.
The company’s Q1 2020 result seemed impressive, with about N260 million worth of profit after tax (PAT) reported. Ideally, this ought to have been a sign of good performances for the subsequent quarters of the year. Unfortunately, this hasn’t quite been the case.
The appalling nature of the second quarter (Q2) results was partly caused by the COVID-19 pandemic, as well as the recent reduction in fuel pump price by the federal government. As you may well know, the virus hit Nigeria at the start of April 2020, thereby ushering Q2 economic activities and operations into a compulsory lockdown. These notwithstanding, no one could have anticipated a revenue plunge 70% deep in the span of 6 months between Q1 and Q2.
Conoil Plc has an impressive reputation as a market leader playing in Nigeria’s downstream oil and gas sector. Due to the company’s positioning in the downstream sector, it is seldom directly affected by events in the often volatile global oil market… until now.
The Nigeria-based company was also hit hard when the federal government decided to allow market forces to determine the price of the pump in the country. The price was reduced to 125p/ltr from 145 p/ltr in late March this year. This contributed to the derisory N19.3 billion posted as Q2 revenue.
The oil giant is in the business of marketing, distributing, and manufacturing under three business products, representing its operating segments. They market refined petroleum products and manufacture lubricants and household Liquified petroleum gas (LPGs) for domestic and industrial use. The three segments; White products (PMS, DPK, LPFO AGO), Lubricants, and Liquefied petroleum gas (LPG), individually and respectively experienced poor turnover in Q2.
Conoil’s recently released financial statement exposes arguably its worst Q2 figure in a couple of years, with Profit after tax (PAT) standing at a paltry N78.3 million. This pales significantly in comparison to Q1 PAT figure of N260 million representing a colossal 70% negative change and an 88.9% decline when compared to Q2 of 2019 with PAT of N707 million.
Revenue for the H1 peaks at N57.5 billion (although comparatively way below H1 2019 at N72 billion YoY) with Q2 Contributing a meager 16% N19.3 billion. Fundamental analysis of the financials, exposes that the sporadic shrink in turnover for Q2 could be attributable to these two major reasons. Firstly, the general lull in economic activities sponsored by the COVID-19 pandemic. This affected CONOIL’s marketable segment, halving the sales figures for white products by approximately 50% from N36.5 billion to N18 billion in Q1 & Q2 respectively. Manufactured lubricants also experienced a 7.7% dip in Q2 at N1.2 billion from N1.7 billion in Q1. The second cause as hitherto stated was the reduction in fuel pump price N145 to N125, for the first time since 2016.
The impact of such a decline in revenue is humongous. It questions the company’s ability to effectively service its debt obligations in the next quarter as well as providing adequate cover for its cost of sales and other expenses.
Investors are reputed to be ruthless pragmatics who accord more importance to the fine-prints than selling price when making purchasing decisions. Thus they often would place emphasis on the statement of cash flow as opposed to the income statement.
Conoil must stay aware and strive in Q3 to maintain a positive net cash position since Q1 & Q2 bear negative balances of N2billion and N1.2billion respectively. Negative cash flow is always a worrying omen. With current ratio for Q2 at 1.47:1 indicating the Oil giant’s relatively unconvincing ability to comfortably settle its liquidity problems if they arise.