The resilience, energy, and creativity of Nigerians are three factors that will mix with strong government policy instruments to steer the country from depression and runaway inflation created by the depreciation of the naira between 2023 and 2024.

These were the views of Abuja-based financial and public policy analyst, Abdulmumin Ali while speaking on the possibilities of recovery from the economy from runaway inflation which hit a high of 33.2 percent by the end of the first quarter of 2024.

Ali, who is also the Managing Partner, QL Resources, called on Nigerians to remain optimistic on the economy, saying that the foreign exchange instability occasioned by last year’s fall in the exchange rate of the naira will likely not be witnessed in much of 2024, thus giving rise to positive returns by most companies.

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Speaking particularly on the low results posted by most of the multinational companies operating in Nigeria, he expressed optimism that there will be a resurgence in the performance of the companies.

Citing an example with Nigerian Breweries, which was among the businesses that were heavily affected by the naira misfortunes at the forex market, Ali said the bold strategies that have already been made by the company towards recovery is a sign that the rest of the economy would reflate soon.

“I am aware that Nigerian Breweries, for instance, is approaching the capital market to raise N600 billion through Rights Issue. This sum, if successfully raised, will not just reflate the company but also set it on the part of a new trajectory by offsetting the debts associated with the bleak balance sheet records of last year. I have also read that most of its dollar-denominated credit lines might be converted to naira thereby staving off exposure to the vicissitudes of foreign exchange fluctuations. These are positive steps that would engender quick recovery,” he stated.

He commended the majority shareholders of the company for restating their commitment to the Nigerian market by opting to raise 50 percent of the N600 billion being sought through the Rights Issue, insisting it was a good sign that the fundamentals of the Nigerian economy remain positive.

“Heineken made a strong statement of its faith in this economy by opting to take up such a significant volume of the offer. What they did is a sign of confidence in the Nigerian economy and the message will be heard across the investment capitals of the world that Nigeria remains a fertile market for investments despite temporary setbacks,” the analyst said.

While further analysing the books of Nigeria’s largest brewer, Ali said the company would have returned impressive results but for the steep fall of the naira.

“If you examine the books of the Nigerian Breweries with a critical eye, you will see that its records were only undone by the steep fall in the value of the naira over six months starting from July to December 2023. But this company recorded a gross revenue increase of 8.9 percent from N550.6bn in 2022 to N599.6bn in 2023, while the Cost of Sales also increased by 14.7 percent from N337.3bn to N387bn over the same period. This led to a 0.34 percent shrinkage in Gross Profit over the year. The spike in the cost of sales, from what one can read from the annual reports, was driven primarily by Raw Materials and Consumables and Transportation costs. These are variables that are expected to remain within manageable limits during the 2024 business year and which would enable the company to return to profitability,” he said.

He commended the company for taking immediate steps to return the company to the path of profitability and said the speed of response has reassured stakeholders of the preparedness of the business to absorb the shocks of the past year and place the company on the course of return to profitability.

“If you look at the 2023 annual result of Nigerian Breweries, for instance, the company performed well on most critical performance indicators but was shaken off the profits path by the external factor naira devaluation. For example, this company recorded a significant growth of more than N1 billion in assets, from N621 billion in 2022 to N797 billion in 2023.

“It also made significant savings in the marketing side of the business, spending N51 billion in 2023 as against N57 billion in 2022. This means that the company, given all other factors, would have made more profits in 2023 than in 2022, but these were undone by the rapid decline in the value of the naira between August and December 2023,” he stated.

But in recent times, the Central Bank of Nigeria has cleared the backlog of foreign exchange obligations, and as we can see, the Naira is beginning to strengthen against the US dollar and other major currencies. These steps being taken by the CBN will restore confidence in the forex markets and ensure stability, meaning that Nigerian Breweries should return to its pre-2023 levels in terms of profitability by the close of this year,” he stated.


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