The half-year profits released by many Nigerian businesses were below expectations, indicating a slowdown in the economy among several causative factors that induced the lower business profits.
Stanbic IBTC’s profits for half of the year dropped by 40% and that of Wema Bank declined by 31%. Nigerian Breweries recorded a 10% lower profit, and Cadbury suffered loss within the same period. Transcorp’s profits were down by 37%, and that of Infinity Trust, a mortgage lender, dropped by 27%.
“The market, investors and traders alike, at this point in time, require seeing positive outlook for the core market drivers,” said Abiodun Keripe, head of research and investment research and strategy at Elixir Investment Partners Limited. “There has to be a positive change to Nigeria’s macro-economic story.”
Considering the fact that inflation is rising in the face of the slowing economy, the Central Bank of Nigeria (CBN) finds it hardy to slack on its tight monetary stance – even though it started its two-day Monetary Policy Committee (MPC) meeting today.
The CBN has a policy rate of 13%, and it has kept 31% as reserve to be fulfilled by banks – a move that makes loans and liquidity difficult for the banks.
Consumer price inflation hiked to 9.2% in June – for a fifth month, and growth for the first quarter of the year dropped to nearly 4%, compared to the 5.9% a quarter earlier – based on analysis from the Bureau of Statistics.
Considering the fact that 80% of Nigeria’s economy is driven by oil revenues, the 40% drop in oil prices experienced last year took a toll on the country’s financial prospects.
President Buhari’s delay in forming his cabinet is also causing uncertainty in the oil sector among other areas of state. “The most unambiguous consequence of Buhari’s delay in forming a cabinet has been in the economic direction,” said Opeyemi Agbaje, CEO of consulting firm Resources and Trust Company.
The inability of many states to pay workers salaries is also causing a drop in consumer spending; coupled with the fact that stocks declined to 9.5% as against the 6.2% gain enjoyed by South Africa. Furthermore, the fall of the naira against the dollar is another determining factor slowing down the economy – the CBN pegged it at N196/USD but it remains N240/USD in the black market.