COVID-19: Seven companies borrowed N112.7bn in Q1

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..Analysts demand action to mitigate effects of pandemic

. ‘Firms are struggling to survive’

 

As the ravaging COVID-19 pandemic continues to negatively affect all aspects of life across the world, seven quoted companies on the Nigerian Stock Exchange have borrowed about N112, 664billion to ramp up their operations in the first quarter of 2020.

This was against the N63, 230billion, which they recorded within the same period in 2019. The companies are Nigerian Breweries Plc, Total Nigeria Plc, Lafarge Nigeria Plc, Eterna Nigeria Plc, Unilever Nigeria Plc, CAP Nigeria Plc, and Nestle Nigeria Plc.

A detailed analysis of the money borrowed by the firms from different sources showed that Nigerian Breweries Plc led the pack with N98, 487billion in the first quarter of 2020 as against N55, 719billion in 2019.

Total Nigeria Plc followed with N87, 729billion within the same period in 2020 as against N39, 877billion in the first quarter of 2019.

Lafarge Nigeria Plc borrowed N16, 105billion within the review period in 2020 as against N14, 666billion in the first quarter of 2019, while Eterna Plc recorded N8, 829billion in the first quarter of this year as against the N8, 686billion loan profile within the same period in 2019.

Others are Unilever Nigeria Plc, with N702, 72million borrowing in 2020, retaining the same figure as in the first quarter of the 2019 financial year. CAP Plc followed with N164, 76million in 2020, and also retaining the same amount within the same period in 2019.

But Nestle Nigeria Plc recorded N158, 52million borrowing in the first quarter of 2020 financial year as against the N4, 958billion within the same period in 2019.

Some capital market operators, who spoke with our correspondent said, due to the escalating global economic impact of the pandemic, many economies around the World, including Nigeria, had witnessed reduced economic activities, and this had adverse effect on companies, which were already struggling even before the pandemic.

An economic analyst, Mr. Emmanuel Badejo, said that Nigeria needed to come up with serious actions that would help mitigate the effects of the pandemic, noting that as the global recession loomed, sectors such as the banking industry, construction, travel and leisure, entertainment, automotive, Oil and gas, amongst others, were expected to be hard hit, adding that these sectors were all major employers of labour in Nigeria.

In her own submission, Head of Investment Bank, Mrs. Gloria Uzorndu, said before the pandemic the Nigerian government had been grappling with weak recovery from the 2014 oil price shock, with the GDP growth tapering around 2.3 percent in 2019.

She explained that most of the company stocks on the Nigerian Stock Exchange had been affected greatly, even as firms were struggling to survive.

Speaking on the effect of the Pandemic, the President of the Manufacturers Association of Nigeria, Mansur Ahmed, said the manufacturing sector was not isolated from the harsh operating environment as the bottom-line of the listed equities, especially as the last few years have remained susceptible to the challenges facing agribusiness in Nigeria.

According to him, the most hit are the share prices of companies on the Nigerian Stock Exchange that have remained stagnated at nominal value year-to-date following negative sentiments that have enveloped their stocks’ demand.

“Ranging from the parlous state of infrastructure to poor access roads to the ports, with the associated traffic gridlock, as well as the activities of multiple government agencies at the terminals, all these have contributed to the current negative position of the manufacturing industry,” he said.

The Publicity Secretary of the Independent Shareholders Association, Moses Igbrude, said the cost of doing business in Nigeria, ranging from raw materials procurement to logistics and issues associated with taxation, was extremely high.

Citing Flourmills, Igbrude said the company had been involved in the funding of the Apapa road construction, noting that it needed to be encouraged by a tax rebate.

He said, “The manufacturing companies are really trying their best. They are really passing through difficult times and making very minute profit, largely due to harsh operating environment.

“For instance, FMN is currently involved in road construction. That is not how it is supposed to be, but because they are right there at the centre of the problem, they do not have choice than to do it.

“When their distributors are coming, their vehicles would queue up for days and they would be discouraged. So, logistic is one of the major problems and when you look at the economy. When you look at their ranges of product, they have embarked on backward integration; they have palm oil and sugar cane farm.”

Director General of the Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf, said Nigerian manufacturers were also feeling the heat as access to critical raw materials needed to sustain their operations had been impacted.

He said the performance of key sectors with the capacity to facilitate economic diversification was largely constrained.

“The global supply chain has been deeply disrupted as China, which is the second largest economy in the world, is a major supplier of inputs for manufacturing companies around the world, Nigeria inclusive,” Yusuf said.

According to him, many manufacturers and service providers in the country are already experiencing acute shortage of raw materials and intermediate inputs.

“This has implications for capacity utilisation, employment generation and retention and adequacy of products’ supply to the domestic market,” he said.