The Nation Newspaper

Tag: Declining

  • El-Rufai’s aide says Amosun’s popularity declining

    An information technology expert and Alliance for Democracy (AD) governorship candidate in Ogun State, Seyi Olufade-Olowookere, has disclosed that scientific researches conducted on two different occasions in the state indicated a declining popularity for Governor Ibikunle Amosun.

    He claimed the surveys were carried out in May and July this year, adding that 76 percent of the respondents in the surveys were not only fed up with the governor and his administration, but also not favourably disposed to supporting whoever he presents as candidate for the March 2019 gubernatorial election.

    The 39-year-old politician who hailed from Iwoye in Ilaro, Yewa South Local Government Area of the state, made this known in a chat with the media in Abeokuta, the Ogun State capital, yesterday, disclosing that he was “technically a member of the All Progressives Congress (APC)” by reason of working for Governor Nasir El – Rufai’s administration in Kaduna State.

    Olufade-Olowookere said even though he fitted perfectly well into the governor’s description of a young IT guru and wizkid, he has elected to pursue his governorship dream independently and on the platform of AD, following the outcome of the said two surveys. He pledged to run a government where transparency, security, law and order, human capital development, infrastructure for economic prosperity, quality education and healthcare service would form the focal point of the administration if elected into office in 2019.

     

  • Group warns of declining revenues, SMEs collapse

    The Association of Micro Entrepreneurs of Nigeria (AMEN) has warned small and medium scale companies to brace for significant declines in revenues this year.

    Its President, Prince Saviour Iche said many SMEs were  closing shop, following the high cost of raw materials and tougher restrictions on foreign exchange (forex) to buy raw materials.

    According to him, SMEs may disappear from the industry, despite their cost-cutting efforts.

    While some SMEs have suffered a downturn in sales, profits have also taken a hit and Iche fears factory closures would be inevitable.

    He said many firms were still mired in hardship, resulting in an increase in dissolved firms.

    Although growth opportunities for SMEs still preside, he said the high operation costs is beginning to impact SME performance.

    He explained that lower revenues is instigating firms to pull back on investment somewhat but business priorities have remained stable.

    Despite the economic challenges, he  said small businesses have continued with fewer resources, adding that some frustration is being seen in the SMEs’ sector at the pace of change and the time it is taking for policy initiatives to be felt among the nation’s small business community.

    Access to credit, he  maintained, still remains the most serious obstacle to the success of small-to-medium enterprises.

    He urged the government to set up a centre for credit services for struggling SMEs.

    He urged the Central Bank of Nigeria (CBN) to  issue policies to encourage commercial banks to set aside preferential capital packages to lend to SMEs.

  • Declining food prices ‘very good’

    Declining food prices ‘very good’

    The United Nations Food and Agricultural Organization’s (FAO) monthly food price index was stable in October, as sugar and vegetable oil prices rose to offset declines in dairy and meat prices, the Rome-based agency reported today.

    The FAO Food Price Index is a trade-weighted index monitoring five commodity group price indices – cereals, meat, dairy products, vegetable oils, and sugar. In October, it dipped to 192.3, technically its seventh consecutive monthly decline, but a marginal 0.2 percent drop from the revised September figure.

    The ongoing slight decline in the index is “very good for food importing countries,” FAO senior economist Concepción Calpe said in a statement.

    Dairy prices fell by 1.9 percent, as butter and milk powder prices dipped due to increased output in Europe, where many producers are grappling with Russia’s ban on cheese imports. The sub-index for dairy products dropped to 184.3, down 3.5 points from September, and 66.8 points, or 26.6 percent down from October 2013.

  • Students discuss declining standards

    The University of Lagos (UNILAG) chapter of the Social Sciences Students Association (SOSSA) has held its maiden annual conference. The event brought together students from all departments in the faculty.

    The event with the theme: The university system in the 21st century: Expectations, misconceptions, challenges and prospects, was initiated by Kunle Onikoyi, the association’s president, to address declining standard in tertiary education.

    Dr Nkem Onyekpe of the History and Strategic Studies Department, in his lecture, noted that the universities in contemporary times must conform to the realities of the century, which, he said, was being affected by globalisation, neo-colonisation and cultural imperialism, amongst others.

    The don stressed that standards were declining because of the underfunding, low remuneration, corruption in employment procedure and politicisation of staff promotion. Management of higher institutions, he said, spend invest more on infrastructures rather than human capital development.

    Dr  Onyekpe asserted that the withdrawal of the state from its obligatory duty of funding school turned tertiary institutions to commercial centers for profit making.

    Proffering a solution, the don said tertiary institutions must stop playing politics with academics. He urged schools to return to scholarship and tackle intellectual laziness.

    He said: “When these challenges are solved, we, in the system, would be able to achieve the three fundamental aims of scholarship, which are to seek the truth, to teach the truth and to preserve the truth for the good of society.”

    Dr Olukayode Eesuola of the Department of Political Science stressed that university was supposed to be a place, where there should be mutual interaction between students and lecturers. He said higher institutions must discourage anything that could dampen the purpose.

    “University is not a place of religiosity; it is a place where ideas flow,” he said, urging lecturers to use conflict of opinions to creates knowledge.

    Dr Franca Arthur stressed that the students should get involved in unionism, saying: “If you don’t participate, you have no right to complain.”

    Comrade Shiyanbola Loremikan, a former National Public Relations Officer of Committee for Defense of Human Rights (CDHR) stressed the need for good character. “Let us promote good citizenship and let people know that Nigerians can succeed with hard work,” he said.

    The Vice-Chancellor, Prof Rahamon Bello, represented by his deputy, Prof Babajide Alo, hailed the students for the initiative, which he said discussed germane issues affecting tertiary education in the country.

     

  • Insecurity,declining income dampen corporate earnings

    The spate of violence in many Northern states is hampering companies’ earnings and may significantly reduce investors’ returns for the current business year.

    A review of operational results of most companies, especially large fast moving consumer goods (FMCGs) companies that thrive on economy of scale and large market, indicated a general decline in the momentum of sales and profitability.

    A source in one of the large food and beverage companies told The Nation that the decline was due mainly to the intractable violence in the Northern part of the country and observed decline in purchasing power of the populace.

    Another source in a quoted healthcare company said the company had to close down most of its Northern operations to safeguard the lives of the staff, noting that this adversely affected the turnover and the company’s margin.

    According to the sources, the companies were forced to scale down their operations as a result of significant build-up in inventories to counterbalance the shortfall from the Northern market.

    Some of the companies were considering right-sizing of their workforce to reduce operating expenses in the face of the dwindling sales. The employees that were servicing the Northern market were redeployed to other regions and the head offices, where, a source said, there are now “more than enough hands” on a job.

    First half reports of Cadbury Nigeria, Unilever Nigeria, DN Meyer, Chellarams and Scoa Nigeria Plc, among others, showed declines in corporate earnings and profitability.

    Cadbury Nigeria’s sales dropped by 12 per cent to N15.32 billion in first half of 2014 as against N17.43 billion in comparable period of 2013. The company’s pre and post tax profits dropped by 50 per cent each. Profit before tax dropped from N3.59 billion to N1.79 billion while profit after tax declined from N2.52 billion to N1.26 billion.

    Unilever Nigeria also reported marginal decline in sales while its bottom-line was depressed by increasing sales and operating costs. Unilever Nigeria’s turnover slipped from N29.67 billion in first half of 2013 to N29.28 billion in first half of 2014. Profit before tax meanwhile dropped by 48 per cent from N3.96 billion to N2.08 billion. Profit after tax declined by 47 per cent from N2.74 billion in first half 2013 to N1.46 billion.

    DN Meyer recorded a pre-tax loss of N59.85 million in first half 2014 as against a profit of N59.01 million in first half of 2013. Loss after tax totaled N61.59 million in 2014 compared with N57.88 million in 2013. Turnover dropped from N720.63 million to N633.46 million.

    SCOA Nigeria also reported significant declines in sales and profit. Total sales dropped from N6.23 billion to N3.42 billion. Profit before tax halved to N77.04 million in 2014 as against N157.42 million while profit after tax dropped from  N123.25 million to N58.25 million.

    With its first quarter of the current business year, Chellarams recorded a loss of N109.13 million in 2014 as against N147.05 million in 2013. Turnover dropped from N7.17 billion to N6.25 billion.

    Corporate sources said spate of violence and lingering and escalating sense of insecurity have been undermining their forecasts given that the Northern market represented a major segment for nationwide companies.

    They said all the sales representatives in major states such as Kano, Kaduna, Sokoto and Maiduguri have been forced to relocate to the Federal Capital Territory (FCT).

    Particularly hard-hit were companies dealing in perishable and breakable products, which have had to contend with longer transportation schedule and sometimes, seizure and obstruction of delivery trucks.

    Corporate sources also said the insecurity in the Northern market has adversely affected the pool of human capital in that segment as existing and prospective employees now turn down placements in the North.

    Companies have been responding to the Northern market challenge by scaling down Northern operations and optimizing opportunities in other markets.

     

  • Rising terrorism, declining deterrence and confidence

    TO say that the terrorism of Boko Haram has soiled the good name of Nigeria as a nation of peace loving and  peaceful people in the comity of nations, is sadly for now, not an exaggeration at all.

    Indeed it is a great understatement and two events bear that out confidently and vividly over this last week. The first were the cheeky but bloody assassination attempts in Kaduna on retired General Muhammadu Buhari a former head of state and opposition politician, and Sheik Dahiru Bauchi, a Moslem cleric who had just preached in that town that day.

    The two events left several innocent people dead. The second testimonial of our descent into the abyss of terror, denting our good name as a nation, was the testimony in far away Tel Aviv, Israel, of no less a person than Israel’s PM Booyamin Netanyahu at a news conference with the UN Secretary General Ban Ki Moon, on Israel’s on going slaughter of Palestinians in Gaza, where in trying to say how vicious Hamas‘ record on terror had been, ended up by proclaiming with great emphasis and finality that Hamas is like Al Qada in Pakistan, Taliban in Afghanistan and Boko Haram. Of course he did not need to mention Nigeria because Boko Haram has stolen the thunder of the bloodiest terrorist groups in the world with its peculiar and constant shedding of the blood of innocent Nigerians with impunity since it commenced its nefarious activities of saying NO to western education a few years back. That Boko Haram of our own shores of Nigeria is now the king pin of world terrorism is unbelievably great but pathetic news. Worse still is the fact that a leader of the state of Israel, a nation of the volatile Middle East whose establishment in 1948 has led to three Middle East Wars with the Arabs, now uses a Nigerian terrorist group to show how bad Hamas is as a terrorist organisation in the Middle East imbroglio. This odious comparison which gives an edge of terror – a primus inter pares of sorts — to Boko Haram, clearly shows that we Nigerians do not know yet what we are up against with Boko Haram given our complacency and business as usual side stepping, when ever the next news of Boko Haram murder and mayhem intrudes rudely and daily into our attention from the news media, as it continually does ad infinitum nowadays.

    Yet, no one in his right senses will say that Netanyahu did not know what he was saying on Boko Haram. Or that Nigerians, Nigeria or its leaders have more experience of terrorism than the Israelis that Arabs-since 1948, and Iran, have vowed to wipe off the face of the earth. Indeed compared with Israel, Nigeria’s experience with terrorism is like aclean slate, until the advent of Boko Haram which has proved ruinous indeed to our sovereign reputation and is now threatening even our collective existence mortally as individuals and collectively as a peaceful sovereign nation state. So, one is left wondering in perplexity how we all have been able to muster the courage and equanimity not to see what Netanyahu has seen in Boko Haram that we have not seen either because of our collective myopia or national astigmatism.

    Yet, again it is obvious that we are oblivious of our predicament given the danger inherent in Netanyahu’s comparison and let me show how this is so, from two utterances from our leaders, also this very week.

    The first was the statement credited to President Goodluck Jonathan at a daily post Ramadan dinner in Aso Rock where he reportedly told visiting members of the diplomatic corps that contrary to the situation in the country and all expectations, the 2015 elections will be free and fair. This was after the twin bombings in Kaduna on Wednesday this week. As the Chief Security Officer and Commander in Chief of Nigeria, the President is in a position to say what he said and guarantee that, but I am sure not many Nigerians share his confidence.

    Indeed some have said that what is needed first is a fast way to deter and crush Boko Haram before 2015 so that the 2015 elections can come in on its own terms and recognisance.

    Without any ominous strings or security premonitions attached, given the present incessant rampage and insolent impunity on the Nigerian state with the bloody bombings and attacks of Boko Haram in Northern Nigeria.

    The second statement was that credited to the Minister of State for the FCT Jumoke Akinjide who reportedly told an audience gathered to mark 100 days of the abduction of the Chibok girls that the Federal government was in a position to defeat Boko Haram as it was bringing in new strategies and buying new equipment and technologies to defeat Boko Haram. She mentioned the Safe Schools Project to secure schools in the North and said the Soft Approach of the FGN was to ensure a safe return of the girls as force alone would jeopardise their safety. Such hope and preparation are commendable. But the money for the equipment is yet to be approved by the National Assembly where some legislators hostile to the President’s request for $1 bn have charged that it could be used for 2015 elections by the president. In addition one can question the use of a soft approach given that the 200 Chibok girls are in the custody of terrorists who have scant regards for girls and have promised in the recent past to marry and sell the girls in a market they said exists.

    What type of life would the girls live after being rescued? Procrastination on their rescue has tarnished their womanhood and their chances of living a future married life tremendously and one is not surprised of media reports that some of their parents have died a premature death from high blood pressure arising merely from contemplating the plight of their dear daughters in the custody of blood thirsty and unashamedly randy terrorists.

    It is my view that the Netanyahu alarm should be treated seriously and all Nigerians should endeavour to condemn and fight Boko Haram to a definite halt. We do not need to carry arms but since this is a nation of deeply religious people and prosperous pastors there is a lot to be done that being just mere by standers. Tony Blair the former British PM provided a clue on fighting terrorism at a Labour Party Conference he addressed after the 2005 bomb attack on London by terrorists. He said that the British people must not succumb to people who want to force them to change their way of life because the US is supporting Israel or think that democracy and Islam are not compatible as this is a false belief. He said the way to fight religious militancy is to use the force of superior arguments to argue and debate against the aims and  objectives of such terrorists. This he said can be done by highlighting true religious beliefs to counter religious terrorism and promoting true legitimate politics under the rule of law. The same measures can be adopted by all Nigerians regardless of their religious leanings to tell off Boko Haram that it has no religious anchor or tenet to be killing innocent people as Islam is indeed a religion of peace and the Boko Haram menace in Nigeria is an anathema to indeed any religion as a guide for moralty and belief in the unseen God in any religion of our time.

    Similarly, Palestinians in Gaza and Jews in Israel or the diaspora should pointedly condemn the Netanyahu government in Israel and the leadership of Hamas for the obvious lack of respect for human lives inherent in

    the ongoing Israeli land incursion of Israel into Gaza.

    Both Israel and Hamas have thrown caution to the winds and are no better than blood thirsty suicide bombers in the manner and bloody costs of their present confrontation in Gaza. Put simply Israel has no moral or legitimate right to be bombing places peopled by children, women and families who are not combatants. Just as it is cruel of Hamas to be using innocent human beings as human shield in shooting rockets into Israel. Both actions are as bad as that of Boko Haram in Nigeria or the Taliban in Afghnistan or ISIS in Iraq or Syria. Killing human beings to achieve an objective when dialogue or diplomacy has not been exhausted is Barbaric and definitely Boko Haram – and both Hamas and Israel are behaving like Boko Haram in the latest bloody but avoidable confrontation in Gaza. And that too is a great shame and pity indeed.

  • Total Nigeria: Declining margins

    Total Nigeria Plc is struggling with low sales growth amidst increasing financing challenge, a delicate mix that threatens to constrict the bottom-line and returns to investors. Emerging operational report of the downstream company showed marginal growth in sales but the minimal top-line performance was overwhelmed by astronomical increase in financing charges. The latest report, for the first half ended June 30, 2013, fell into the pattern of performance in the previous year. The audited report had indicated that while the company witnessed significant growth in sales, declining underlying fundamentals showed a less efficient and increasingly susceptible performance.

    First-half report showed that sales rose by about 7.0 per cent to N117.29 billion by June 2013 as against N109.84 billion recorded in comparable period of 2012. Gross profit rose from N12.91 billion to N15.56 billion. Profit before tax meanwhile dropped by 7.0 per cent from N4.81 billion to N4.47 billion. Profit after tax also declined by 9.0 per cent from N3.27 billion to N2.98 billion. The decline in earnings per share from N8.61 in 2012 to N7.10 in 2013 outlined possible drop in returns to shareholders.

    The first-half performance was coloured by the sharp rise in interest expenses. While non-core business income dropped from N579.95 million to N267.90 million, interest expenses jumped from N21.99 million in 2012 to N596.6 million in 2013. Profit before tax margin slipped to 3.81 per cent in first half 2013 as against 4.38 per cent in comparable period of 2012. The weak bottom-line evidenced the negative impact of the interest burden. Gross profit margin had improved from 11.75 per cent to 13.27 per cent.

    Audited report and accounts of Total Nigeria for the year ended December 31, 2012 had shown substantial outward growths in profit and loss items with 25 per cent and 23 per cent growth in sales and profit after tax respectively. The obvious improvement in the bottom-line enabled the company to increase dividends to shareholders by 22 per cent. But beyond the surface, Total Nigeria’s profit-making capacity was relatively lower and its balance sheet support weakened considerably. With high financial leverage and negative working capital, the overall balance sheet was unsteady.

     

    Financing structure

    The underlying financing structure was evidently weaker with debt-to-equity ratio spiraling to a high of 129 per cent as against 32 per cent in previous year. The proportion of equity fund to total balance sheet size declined from 17 per cent to 14.9 per cent while current liabilities now amounted to 81 per cent of total assets as against 78 per cent in previous year.

    Total assets rose by 29.5 per cent from N58.72 billion in 2011 to N76.07 billion in 2012. Non-current assets had grown by 11 per cent from N18.29 billion to N20.33 billion while current assets grew by 38 per cent from N40.43 billion to N55.74 billion. Total liabilities stood at N64.77 billion in 2012, 33 per cent above N48.69 billion recorded in 2011. Bank loans jumped by 357 per cent from N3.19 billion to N14.56 billion. With the paid up capital unchanged at N169.8 million, shareholders’ funds rode on the back of retained earnings to N11.30 billion in 2012, 13 per cent above N10.03 billion posted in 2011.

     

    Efficiency

    Total Nigeria was straddled between declining top, mid and bottom-line margins. Average margin was flat, although average productivity improved. Average number of employees increased by two persons from 472 persons to 474 persons. Total staff cost increased from N4.72 billion in 2011 to N5.23 billion in 2012. Average cost per staff thus increased from N10 million to N11 million. Average pre-tax profit per employee meanwhile improved from N12.41 million to N15 million. Total cost of business, excluding financing charges, was flat at 96.5 per cent.

     

    Profitability

    Total Nigeria recorded a mixed grill with declining margins counterbalancing outward growths. Turnover rose by 25 per cent from N173.95 billion to N217.84 billion. The top-line was driven mainly by impressive 27 per cent growth in the main petroleum products business segment, which rose by 27 per cent from N153.93 billion to N196.07 billion. Cost of sales outpaced total sales’ growth with 26.5 per cent increase from N1151.53 billion to N191.63 billion. Gross profit thus rose by 17 per cent to N26.21 billion in 2012 as against N22.42 billion. Total operating expenses increased by 13 per cent from N16.37 billion to N18.56 billion. Non-core business income grew by 49 per cent from N687 million to N1.02 billion. Interest expense jumped by 80 per cent from N875 million to N1.57 billion. With these, profit before tax rose by 21 per cent from N5.86 billion to N7.1 billion. Profit after tax also grew by 22.5 per cent from N3.81 billion to N4.67 billion.

    Earnings per share thus increased from N11.23 in 2011 to N13.76 in 2012. The company increased gross dividend by similar margin from N3.06 billion to N3.74 billion, indicating earnings per share of N11 for 2012 as against N9 in 2011. Dividend cover was however flat at 1.25 times. Net assets per share stood at N33.29 in 2012 compared with N29.53 in 2011.

    Beyond the surface, underlying profitability ratios were generally negative. Gross profit margin dropped from 12.9 per cent to 12 per cent while profit before tax margin slipped from 3.4 per cent to 3.3 per cent. Return on total assets dropped from 10 per cent to 9.3 per cent. Return on equity was however higher at 41.3 per cent as against 38 per cent in previous year.

     

    Liquidity

    The liquidity position of the company remained tepid with marginal improvement in current ratio counteracted by negative working capital. Current ratio, which broadly indicates ability of the company to meet emerging financing needs by relating current assets to relative liabilities, improved slightly from 0.88 times in 2011 to 0.90 times. The proportion of working capital to total sales stood at -2.9 per cent in 2012 as against -3.2 per cent in 2011. Debtors/creditors ratio stood at 31.6 per cent in 2012 as against 35.7 per cent in 2011.

     

    Governance and structures

    Total Nigeria was incorporated in 1956 as a private limited liability company and became a public limited liability company in 1978. Total Nigeria is a subsidiary of French multinational and Europe-leading oil company-Total S. A. There were some changes on the board and management of the company. Mr Momar Nguer became the chairman of board of directors. Mr Francois Boussagol meanwhile remains the managing director. Total Nigeria broadly complied with extant codes of corporate governance and best practices.

     

    Analyst’s opinion

    The latest audited report and interim report of Total Nigeria underlined the need for a careful consideration of the business strategy of the company. While sales growth is commendable, and should be sustained, the company needs to realign its costs to optimise sales into tangible returns to shareholders. Besides, the company faces a looming challenge of financial mismatch with expanding loan book gradually eroding the bottom-line. The first half report for 2013 clearly illustrated this. With 2,613 per cent increase in interest expense from N21.99 million in first half of 2012 to N596.60 million in first half 2013, both actual and underlying profit measures turned negative. Profit before tax dropped from N4.81 billion to N4.47 billion while profit after tax declined from N3.27 billion to N2.98 billion. Average profit before tax margin dwindled from 4.38 per cent in first half 2012 to 3.81 per cent in first half 2013. The company needs to address the disconnect between the top-line and the bottom-line.