BUSINESS CEOs blame Naira shortages, elections for widespread increase in operating expenses
Nigerian businesses are reporting a widespread increase in operating expenses driven by the 2023 election, cash shortages, and rising inflation that has taken its toll on their operations.
The Nigerian economy is experiencing galloping inflation which arose out of a combination of higher energy prices, an increase in the money supply, and exchange rate depreciation. Some companies have also reported the impact of the cash scarcity brought about by the introduction of new naira notes as a contributing factor.
A Nairametrics review of the first quarter 2023 income statement of 24 of the NSE 30 companies reveals a total operating expense of about N441.8 billion compared to N386.6 billion for the same period in 2022. Input costs, otherwise called the cost of sale, also rose 3.9% to N1.154 trillion.
FInance costs also rose from N92.9 billion to about N118 billion as interest rates rise in reaction to higher central bank monetary policy rates. The increase also ate into margins.
Some of the companies on our list include Dangote Cement, MTN, Nestle, Lafarge, BUA Foods, BUA Cement, Unilever, and Nigeria Breweries. Others include Notore, Seplat, Total, Fidson, May & Baker, GSK, Okomu Oil, and Livestock Feed. We also reviewed the financial statements of Dangote Sugar, NASCON, Cadbury, CAPL, Julius Berger, Beta Glass, Transcorp, and UACN.
These companies cut across manufacturing, construction, FMCGs, Healthcare, Agriculture, and Conglomerates. Nairametrics considers them bellwethers for the state of the economy from the perspective of the private sector.
Operating expenses include selling and distribution expenses as well as admin and general expenses. The first quarter of 2023 was particularly poignant, especially due to a combination of economic pressures that were completely out of the control of companies.
During the quarter, Nigerians suffered through an excruciating currency crisis that affected trade nationwide. The general elections in February and March also affected the flow of business across the country as Nigerians worried about post-election violence.
In 2022, most Nigerian companies were able to address cost pressures by raising prices and pushing volumes. However, the cash shortages and election campaigns slowed down their ability to find ways to absorb the cost and retain profit margins.
