Corporate Nigeria represented by the largest listed companies on the Nigerian Stock Exchange experienced a reduction in business travel expenses in the year 2020.
According to data obtained from the audited financial statements of the top 30 companies listed on the Nigerian Stock Exchange (NSE) known as the NSE-30 and verified by Nairametrics Research, travel expenses dipped by 36.97% from N49.54 billion recorded in 2019 to N31.22 billion in 2020.
Travel expenses include flight tickers, hotel expenses, cost of renting and maintaining private jets, local interstate and intrastate transportation etc.
- Of the 30 companies considered, only 3 of them increased their travel expenses in 2020. Notably, Guinness increased its travel expenses by 283.1% from N261.4 million to N1 billion in the review period.
- Nascon Allied Industries and Presco Plc incurred a sum of N91.8 million and N2.02 billion in travel expenses, representing a 125.2% and 33.7% increase respectively.
- On the other hand, MTN Nigeria recorded the highest decline in travel expenses, reduced by 79.9% to stand at N964 million as against N4.79 billion recorded in 2019. Stanbic IBTC followed with a decline of 60.95% to stand at N676 million.
- It is worth noting, that some companies were not included in this study as they did not disclose their travel expenses during the period under review.
Why the drop?
The drop in travel expenses was expected as the entire private sector experienced a lockdown for most parts of the year due to Covid-19. The Federal Government introduced movement restrictions on land, sea, and air commute in response to the spread of the Covid-19 virus.
- This resulted in the cancellation of business travel expenses across the commercial and political nerve centres of the country. Bearing the brunt of this cut in expenses were airlines, hotels, and the entire travel industry who suffered massive revenue losses.
- The travel industry has been one of the worst-hit sectors due to the COVID-19 outbreak with lockdowns, travel bans, restrictions, and quarantines, which have had a severe impact on business travel for corporate entities in Nigeria.
- High travel cost implications, hotel rates, and reduction of airline services also made companies resort to phasing out in-person meetings and business travel, as it is more affordable and productive to go digital.
- The deployment of technology has helped companies cut their travel expenses since part of the key reasons for business travel is for conferences, meeting suppliers and customers. Going forward, video calls show strong potential to replace in-person meetings, resulting in fewer business travels.
- Additionally, business travels that are meant for training and other learning activities can be done through e-learning.
- The consistency of corporate entities in adopting technology by going digital will likely continue to reduce business travel expenses of corporations in the country.
Gains and losses
On the flip side, online virtual work from home tools such as Microsoft Teams and Zoom recorded massive revenue boost as the private sector and even government relied on them to connect with clients, employees and other stakeholders.
- Unfortunately, Nigerian businesses, particularly the tech sector failed to take advantage of the travails of the hospitality sector losing much of this revenue to the likes of Microsoft, Google, Netflix, and Zoom. Nevertheless, other Nigerian tech companies, especially in the entertainment, payment, savings and loans space all recorded a significant boost in topline revenues.
The top 5 spenders
The increase or drop in travel expenses for some of the companies under review suggests the approach management took in response to the Covid-19 lockdown. While some reacted by going completely remote as indicative of their numbers, others continued spending, perhaps due to an inefficient cost structure that could not be scaled down despite the imposed lockdown.
Access Bank (N7.15 billion)
Access Bank Plc spent a total of N7.15 billion on business travel expenses in 2020, representing a reduction of 31.9% compared to N10.5 billion recorded in the previous year.
- The tier-1 bank accounted for 22.9% of the total travel expenses incurred by the top 30 companies on the NSE.
- The bank’s total asset as of December 2020, stood at N8.67 trillion, representing the highest on the NSE.
UBA (N4.94 billion)
United Bank for Africa incurred a sum of N4.94 billion on business travels in the year 2020. Its travel expenses reduced by 30.1% compared to N7.06 billion recorded in 2019.
- Its expenses accounted for 15.8% of the total recorded by companies under consideration.
- UBA recorded a growth of 27.7% in profit after tax from N89.1 billion recorded in 2019 to N113.8 billion in 2020.
FBN Holdings (N3.51 billion)
FBN Holdings the parent company of First Bank of Nigeria, one of the major financial institutions in the country, spent a total of N3.51 billion on travel expenses in the year under review.
- The tier-1 bank reduced its business travel expenses by 48.24% from N6.78 billion recorded in 2019 to N3.51 billion.
- Also, FBN Holdings accounted for 11.2% of the total business travel expense of the companies under consideration.
- It is worth noting that FBN Holdings classified its travel expenses as passages and travels.
Dangote Cement (N2.11 billion)
The most capitalized company on the Nigerian Stock Exchange, valued at N3.7 trillion spent a total of N2.11 billion on business travel expenses in 2020.
- The foremost cement manufacturer in Nigeria recorded a 13.8% decline in travel expenses from N2.45 billion recorded in 2019 to stand at N2.11 billion in 2020.
Presco Plc (N2.02 billion)
Presco Plc, a fully-integrated agro-industrial establishment specializing in the cultivation, extraction, refining, and fractionation of crude palm oil into finished products, spent a total of N2.02 billion on travel expenses in 2020.
Its travel expenses in 2020, represent a 33.71% increase compared to N1.51 billion recorded in the previous year.
- It also accounted for 6.5% of the total travel expenses recorded by the companies under consideration.
- Zenith Bank – N1.88 billion
- Seplat – N1.26 billion
- Guinness – N1 billion
- MTN Nigeria – N964 million
- Fidelity Bank – N964 million
Note: Fidelity Bank classified its expenses as travelling and accommodation, while MTN Nigeria as Trainings, travels and entertainment cost.