The Proof Is In Company Second Quarter Results By Nasiru Suwaid
Immediately I published my article of last week, a challenge was thrown at me, whether I have not contradicted myself in my submissions and established as a fact, unjustifiable and indefensible exaggerations, which is when a sector of the economy affected, that is contributing less than 10% percent of the Gross Domestic Product (GDP) to the economy or to be more specific, 7% percent of the Gross Domestic Product (GDP), its impact is projected and presented as having the capacity and capability to torpedo a whole economy. To put it in a more proper context and in a more understandable format, the poser is questioning whether any policy that only affects the manufacturing sector, in a none industrially dependent economy or largely import reliant country, could rightly be said, were an inflationary trend to affect production, create huge and unsustainable inventory and impact negatively on industrial growth, solely, such a policy could have a general impact on the overall Nigerian economy.
If my analysis is to be guilty of anything, it is that it largely highlighted and pronounced the manufacturing sector, as the subsector mostly being affected, but, I was distracted to resort to finger pointing, because of the prominence and feisty activism of the Manufacturing Association of Nigeria (MAN) and National Association of Chambers of Commerce Industries Mines and Agriculture (NACCIMA), in the demand for the removal of petroleum subsidy, as if its impact is not going to affect the industries trade union.
Because, largely, the impact of the unsustainable inflationary trend, were it to ever have tremendous effect on the Nigerian economy, it must not only affect industrial production and manufactured produce market consumption, it must also have impact on general trading in goods and services, which is the case of Nigeria, as a predominantly import driven economy.
Thus, it would be safe to assume, high inflationary rate in Nigeria not only impacted on local industrial production and growth, it severely affected trading in goods and services, as such, strained import trading activities and general consumption pattern in the Nigerian economy. But, how can you prove that? It is very simple, you just take a look at the most important service sector of the economy, those whom I call the ennoblers of production and enablers of trade, the banking institutions that give credit to produce, open letters of credit for import trading and ensures the flow of monetary activities in the economy. A little peek into the subsector, in terms of turnovers, profitability and growth, would determine whether during the course of period in issue, high inflation was able to effect consumer purchasing activities and growth.
Luckily for me, it was last week that the Nigerian Stock Exchange (NSE), received the second-quarter results of most of its quoted companies and apart from the generally established trend of bad results or rather, less than expected profits, signifying a general downturn in the Nigerian economy. For the banking subsector, it is a tale of woes and bad stories about less than projected incomes. However, for this analytical piece and due to space constraint, I am using random sampling and in no particular order of preference, to present the financial results of only two banks, as a representative example of the financial performance of most quoted Nigerian companies but most specifically, most Nigerian banking organizations, during the duration of the second quarter operational working period.
In assessing the banking results, although there is still seemingly a wonderful turnover, however, when paired in relative to the previous years but most importantly, where it is compared with the projected income and profit for the financial year 2015, it is a story of financial disappointment and a signal on how inflation has wrecked havoc on Nigerian business activities. Take the Diamond Bank, which reported an 11% percent decline in half year pre-tax profits. The mid-tier lender also saw basic earnings per share drop by 45.3% percent, even though, the bank’s top line earning rose to 83.16 billion naira from the 78.72 billion of last year, but despite all that and in comparison with previous years, it is the worst quarterly returns since the year 2012. Also, Stanbic IBTC Bank profit dropped by 52% percent, relative to the half year 2014 figures, as there is a drop of 52% percent and 40% percent in Profit Before Tax and Profit After Tax respectively, even though, gross earnings by the bank grew by 11% percent to stand at 68 billion naira in the period of operation.
Literally, the question to ask is how has the above figures have impacted and affected the Small and Medium scale Entrepreneur (SME), what is its effect on traders and general trading activity, did it impact on consumer purchasing power during the period. Unfortunately, it had a tremendous effect on the business climate, as those lesser figures in turnovers and profits signify less trading transaction, lesser imports and more poverty, when a trader could not sale, where a consumer cannot buy and if an entrepreneur could not get credit, the result is more penury and a celebration of inflation. It is in this prevailing circumstance, which the Organized Private Sector (OPS) and the general commentary community, have been calling for the removal of petroleum subsidy, as an easy route and lazy approach to tackling corruption in the downstream sector of the petroleum industry.
Not minding its debilitating impact on the inflationary trend in the economy, most especially, its effect on the same Organized Private Sector proponent, as a more expensive Petroleum Motor Spirit, means more energy and transport cost and less money for consumer purchasing activity. The challenge here is on how an elected president, can make a policy decision that could throw million of his citizens into more poverty, even when the freed and saved subsidy funds, must be shared with the three tiers of government, being the federal, state and local governments. And, legally and constitutionally, President Muhammadu Buhari, does not have the power to force other tiers of government, to practice prudent fiscal financial responsibility in management, beside, their past precedence bear a different history of profligate stewardship.
And this two other things:
MARKET FALL IS A GLOBAL PHENOMENA
It was on Monday the 27th of July, 2015, I read a press release by the spokesman of the opposition People’s Democratic Party, Chief Olisa Metuh, where he blamed the lack of clear economic vision, for the fall in share value at the Nigerian Stock Exchange (NSE), ranting that about 1.1 trillion naira in share value, was lost since the inception of the present administration. Unfortunately for the inefficient propagandist, on that same Monday, the Chinese Stock Market lost up to 8% percent of its value, at the end of the day’s trading market, in fact, cumulatively, since the beginning of the Greek financial crisis, which is roughly equivalent to the time, the present administration was sworn into office, the Chinese Stock Market has lost around 35% percent if its core value. This is not even focusing and discussing on the more immediate and interconnected European markets, which had been taking a beating, since the Greek economy took a turn for the worst.
THANK YOU SPEAKER YAKUBU DOGARA
One of the hallmark of true leadership is the ability to compromise, to be able to take hard decisions that might not profit us and could even constitute a threat to us, were we to elevate those who had once coveted our offices, into positions that strengthen them, yet we did it, for the greater interest of party unity, party supremacy and political camaraderie. This is exactly what happened at the House of Representative on Tuesday the 28th of July, 2015, when by that singular act of political chivalry, the leadership of the house, virtually brought the crisis in the lower chamber to an abrupt end and most gladly, the sacrifices was done on the advice of the president, not because of the power of his office but, out of sheer courtesy to an elder, who had seen it all and should know what is the best thing to do. Just imagine, how I wish other leadership of the National Assembly, would just respect age and wisdom of our leaders, it shall be a great beginning for the future.
Follow me on twitter: @neeswaid