Nigeria Economy | |
Nigeria Economy | |
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Saturday, June 27,
2020 06:50 AM / by Proshare Content/ Header Image
Credit: EcoGraphics
Manufacturing
Sector
The manufacturing sector in Nigeria is
comprised of thirteen activities: Oil Refining; Cement; Food, Beverages and
Tobacco; Textile, Apparel, and Footwear; Wood and Wood Products; Pulp Paper and
Paper products; Chemical and Pharmaceutical products; Non-metallic Products,
Plastic and Rubber products; Electrical and Electronic, Basic Metal and Iron
and Steel; Motor Vehicles and Assembly; and Other Manufacturing.
Illustration 23: Global Supply Chain Interdependencies and COVID-19
Impacts
Disruption of the global supply chain has
negatively affected the manufacturing sector in Nigeria. The manufacturing
sector recorded slow growth in Q1 2020. It grew by 0.43%, lower than Q1 2019
growth rate of 0.81% and Q4 2019 growth rate of 0.43%. Many manufacturers and
service providers in the country are already experiencing an acute shortage of
raw materials and intermediate inputs. This shortage has affected their
capacity utilization, employment generation, adequacy of product supply to the
domestic market and has led to an increase in the cost of inputs which are
largely imported.
Other challenges in the manufacturing sector
attributable to the pandemic includes an increase in foreign exchange risks and
increasing operational cost, dip in sales as Nigerian are focused on staying
alive.
Chart
115: Manufacturing Sector Quarterly
Growth Rate (%)
Source: NBS, Proshare Research
Note Asterisks (*) - Forecasted figures
Case Study: Nestle Nigeria Plc
Nestle Nigeria Plc is a food
manufacturing and marketing company. It is engaged in manufacturing, marketing
and distribution of food products, including purifies water throughout the
country. It operates through two segments: Food and Beverages.
Nestle Plc PBT
Nestle Plc recorded an upward trending PBT between 2015 and 2019. Its PBT grew by 6.65% in 2019. Its PBT increased from N266.3bn in 2018 to N284bn in 2019 (see Chart 116). Its PBT is projected to decline slightly in 2020 due to an impending recession caused by the coronavirus.
Chart 116: Nestle
PBT (N'bn) 2015-2019
Source: Nestle Plc Financials, Proshare Research
Nestle Plc Revenue
Nestle Plc recorded a yearly
increase in its revenue. Its revenue grew by 18.9% in 2019. Its revenue
increased from N59.8bn in 2018 to N71.1bn in 2019 (see Chart 117). Nestle Plc's revenue for 2020 is projected to
decline slightly in 2020 due to the looming impending recession in the economy
and projected fall in consumption demand.
Chart 117: Nestle
Plc Revenue (N'bn) 2015-2019
Source: Nestle Plc Financials, Proshare Research
Nestle Plc Current Ratio
Nestle Plc's current ratio
fluctuated between 0.81 and 0.91 from 2015 to 2019. Its current ratio is 2019
was 0.85, a decline from 0.90 in 2018 (see Chart 118). Its low
current ratio implies that Nestle Plc may have liquidity problems, meaning that
it might have problems meeting its short-term obligations. Its current ratio
may not significantly respond to the virus's effect on the economy.
Chart 118: Nestle
Plc Current Ratio 2015-2019
Source: Nestle Plc Financials, Proshare Research
Nestle Plc Acid-Test Ratio
The company's acid-test ratio
fluctuated between 0.59 and 0.97 from 2015 to 2019. Its acid-test ratio
declined from 0.65 in 2018 to 0.59 in 2019 (see Chart 119). It
indicates that the company does not currently have sufficient current assets to
cover its current liabilities which means it is heavily invested in inventory.
Its acid-test ratio is projected to decline further due to the coronavirus.
Chart 119: Nestle Acid-Test Ratio 2015-2019
Source: Nestle Plc Financials, Proshare Research
Nestle Leverage Ratio
The confectioners leverage
ratio was 0.12 in 2019. It did not record any change from the previous year (see Chart 120). Its low leverage ratio
implies that Nestle Plc's operations and sales are generating enough revenue to
grow its assets through profits. Its projected decline in profit in 2020 due to
the impending recession coupled with the need to expand operations would most
likely lead to a rise in its leverage ratio for 2020.
Chart 120: Nestle Leverage Ratio 2015-2019
Source: Nestle Plc Financials, Proshare Research
Related Reports (PDF)
1. Download the Full PDF Report - Coronanomics and the Nigerian Economy, June 06, 2020
2. Executive Summary PDF - Proshare, June 06, 2020
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Related Links and References
Related News - Opinions & Analysis
Related News - Reviews and Outlooks
Related News - Nigeria Economy
1. COVID-19 and the Construction Sector
2. The Lockdown - Food Scarcity and Social Unrest Looming
3. April 2020 Headline Inflation Will Cross 13.0% - FDC
4. Nigerian Economic Update: A Throw of the Dice
5. Guidelines and Recommendations: Reopening the Nigerian Economy
6. GDP By Income and Expenditure Approach Q4 2019 - Household Final Consumption Declined by -2.40%
7. Ahead of Tomorrow on WebTV: Discussions on COVID-19; Reinventing Nigeria's Economy
8. Nigeria Weekly Update: Short and Long Currency Cycles
9. Nigeria Needs A National Strategy To Integrate Factor Endowment Into A Plan - Prof. Utomi
10. A Surprising Boost to the FAAC Payout; April Payment Amount to N781bn
11. Ahead of Tomorrow on WebTV: Discussions on Repositioning Nigeria's Economy Beyond COVID-19
12. Impact of Privatization on Nigeria's Economy
13. Can Africa Afford COVID-19 Lockdowns? - Chukwuma Soludo
14. COVID-19; Nigeria Needs To Relax Foreign Exchange Management To Boost Industrialization - Dr. Yusuf
15. Nigeria's Economy After Oil: How Should We Prepare?
16. The Disruptive Impact of COVID-19
17. Nigeria's Impending Recession
18. Roadmap to Rebooting Nigeria's Economy from COVID-19
19. Coronation Weekly: Interest Rate Conundrum
20. Headline Inflation Increases By 12.26% YoY In March 2020; 0.06% Higher Than February 2020 Rate
21. Ahead of Tomorrow On WebTV: COVID-19 and The Strategic Implications to Business Planning
22. #Coronanomics: The Changing Scale of Edtech, Healthtech, and Virtual Work Space In Nigeria
Related Reports/Articles
1. COVID-19 and AGM by Proxy: Lessons from GTBank Approach
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3. The End of an Epoch: A New Beginning for Capital Markets in the 21st Century - Bruce Fenton
4. Nigeria's Post COVID-19 Economic Outlook - Economics Associates
5. Which Emerging Markets Are in Most Financial Peril?
6. Global Monthly - World Bank Group
7. World Economic Outlook 2020 - The Great Lockdown
8. COVID-19: Economic, Tax and Other Fiscal Stimulus Measures in Nigeria
9. COVID-19: Crisis And Opportunity
10. COVID-19: Nigeria Economic Impact and Implications for CPG - McKinsey and Company
11. The Economics of a Pandemic: The Case of COVID-19 - London Business School
12. The Impact of The COVID-19 Pandemic in Nigeria - UNDP Nigeria
Coronanomics Discourse-WebTV Videos
2. COVID-19: Time For Nigeria To Diversify Its Revenue Base Through Agro, ICT - Ayuli Jemide
3. Post COVID-19: Nigeria Must Prioritize Agro and Manufacturing, To Drive Productivity - Ray Echebiri
4. Post COVID-19: States Should Rethink Their Economic Models To Drive Productivity - Teslim Shitta-Bey
5. Economy & Politics: Nigeria Needs a Post COVID 19 Long-Term Plan - Boason Omofaye
7. Economy and Politics: How Nigeria Can Address Its External Illiquidity - Ayo Teriba
8. Economy and Politics: Nigeria Must Deregulate Its Petroleum Sector Post COVID 19 - Boniface Chizea
14. Market Review: States Need Integrated Economic Policies Post COVID 19 - Teslim Shittabey
17. Market Review: Nigeria Needs a Robust Regulatory Framework for Virtual AGMs - Bayo Olugbemi
18. Market Review: Nigeria Must Deploy Data to Effectively Mitigate COVID 19 Risks - Babajide Ogunsanwo
20. Market Review: Deregulation of Downstream Sector, Way Forward for Nigeria - Olugbenga Odusanya
21. Economy and Politics: CBN Should Reduce the CRR and MPR - Marcel Okeke
23. Market Review: COVID 19, An Opportunity for Companies to be Empathetic to Consumers - Lampe Omoyele
24. Economy and Politics: Nigeria must Drive a Harmonized Tax Plan Post COVID 19 - Taiwo Oyedele
28. Economy and Politics: Why Nigeria Should Explore a N20trn Development Bond - Tope Fasua
29. Market Review: Nigeria Needs More Project Based Funds to Attract Investments - Ebo Ayodeji
32. Nigeria Needs to Align its National Database to Deepen Social Investments - Laoye Jaiyeola
33. Post COVID 19: Time for Nigeria to Restructure its Fiscal Framework - Zeal Akaraiwe