Outlook 2021: How Sectors of the Economy Fared in 2020 - Transportation Sector

Proshare

Sunday, February 21, 2021   /05:40 AM / By Proshare Research/ Header Image Credit: EcoGraphics


 Proshare Nigeria Pvt. Ltd.  

 

The negative impact of the COVID-19 pandemic on the transportation sector cannot be overemphasized seeing that the transportation sector is an integral part of an economy. The transportation sector plays an important role in the social and environmental aspect of the economy which was adversely affected by the induced lockdowns caused by the pandemic. The role the sector plays has multiplier effects such as better investment opportunities which leads to employment and better accessibility to markets for suppliers of goods and services.

 

Overall, the transportation and storage sector has declined for two consecutive quarters - the growth rate has been negative. Although the sector recorded a growth rate of 2.82% in Q1 2020 from -0.80% recorded in Q4 2019. However, the Q2 and Q3 2020 results reflected the adverse impact the pandemic has had on the sector (see Chart 61).

 

With the financial gap created by the pandemic in the transportation sector, it calls for increased collaboration of the government and private sector, re-evaluation and restructuring of the sector. This would increase the efficiency of the industry, thereby, aiding the development of other sectors and consequently push revenues for the overall economy.

 

Chart 61: Transportation and Storage Sector Growth Rate 2016 - 2020(%)

Proshare Nigeria Pvt. Ltd.

Source: NBS, Proshare Research

 

Aviation Sub-Sector

The aviation sector was one of the hardest hits by the COVID-19 pandemic. It led to major disruption of airline operations and reduced revenue generation by the sub-sector. The lockdowns and restrictions translated to the complete shutdown of major airports as local airports were closed with only essential flights allowed. Reduced revenue led to furlough and huge layoffs as most airlines would not meet their financial obligations. 

 

Unlike in major economies around the globe, the intervention funds injected by the government into the aviation sector was insufficient. In a bid to recover from the downturn in profitability by these airlines and abiding by the COVID-19 rules, there was a spike in transportation fares of people and goods.

 

The sub-sector growth rate has seen a steady decline for two quarters consecutively. In Q2 2020, the severe impact of the pandemic on the growth rate of the sector was more pronounced, as it recorded a Y-o-Y decline of -57.38%, the highest decline the sub-sector had recorded in over eighteen quarters. In Q3 2020, the sub-sector had a lower decline of -38.86% Y-o-Y, although it was still a negative growth (see Chart 62).

 

Chart 62: Aviation Sub-Sector Growth Rate 2016 - 2020 (%)

Proshare Nigeria Pvt. Ltd.

Source: NBS, Proshare Research

 

Case Study

 

ABC Transport Plc 

ABC Transport Plc is a road transportation company that ferries goods and people across surface transport networks along the West African coast. The company is involved in haulage services, importation and sales of vehicle spares, installation of motor vehicle speed governing devices, assembly of heavy-duty trucks under the automative policy of Nigeria, and the hospitality business. The operations of the transport company were greatly impacted by the coronavirus-induced economy. Its top-line and bottom-line recorded declines.

 

Furthermore, there was an increase in the total debt of the company to meet its short-term obligations. Its share price also tanked during the peak of the pandemic. Lately, the company recorded a marginally increase in its share price, though, the share price has not returned to the pre-COVID price (see Chart 63).

 

Chart 63: ABC Transport YTD Share Price Movement as of 14 Dec 2020

Proshare Nigeria Pvt. Ltd.

Source: NSE, Proshare Research

 

ABC Transport - Revenue 

In response to lockdowns and restrictions induced by the coronavirus, its gross revenue declined by -48.52% Q-o-Q in Q2 2020. In Q3 2020, ABC transport recorded a Q-o-Q improvement in its revenue. But Y-o-Y, its revenue declined by -9.33% from N1.61bn in Q3 2019 to N1.46bn in Q3 2020.

 

For its nine months result, gross revenue increased by +5.58%, this was majorly driven by +206.97% growth in revenue from the sale of vehicles and spare parts, despite the decline in all other revenue segments of the transport company (see Chart 64).


Chart 64: ABC Transport Gross Revenue 2019 - 2020 (N'bn)

Proshare Nigeria Pvt. Ltd.

Source: ABC Transport Financial Statement, Proshare Research

 

ABC Transport - Profit Before Tax 

ABC Transport results in 2020 (Q1 - Q3 2020) shows it made losses for three quarters consecutively. Quarter-on-Quarter, its PBT declined in Q1 2020 and Q2 2020 by -156.26% and -109.81% respectively which was a result of the adverse effects of the pandemic.

 

In Q3 2020, its PBT declined significantly by -171.26% from N167.25m in Q3 2019 to a loss position of N119.18m (see Chart 65).


Chart 65: ABC Transport Profit Before Tax 2019 - 2020 (N'm)

Proshare Nigeria Pvt. Ltd.

Source: ABC Transport Financial Statement, Proshare Research

 

ABC Transport - Current Ratio

A current ratio of 1.24 for a company that offers transport services is preferred which shows the company can meet its short-term obligations. ABC transport's current ratio for the period under review has been below 1 (one) which shows the company has liquidity challenges and may not be able to meet its short-term obligations (see Chart 66).

 

Chart 66: ABC Transport Current Ratio 2019 - 2020

Proshare Nigeria Pvt. Ltd.

Source: ABC Transport Financial Statement, Proshare Research

 

ABC Transport - Quick Ratio 

The ideal quick ratio (also known as the acid-test ratio) for a transport company is 1.14, which indicates that the company will be able to meet its short-term obligations without having to sell its inventory. The latest result released by the Transport Company (Q3 2020) shows a quick ratio of 0.30 which is the lowest the Company has released during the period under review. This indicates tight liquidity challenges that needs to be addressed by the company (see Chart 67).


Chart 67: ABC Transport Quick Ratio 2019 - 2020

Proshare Nigeria Pvt. Ltd.

Source: ABC Transport Financial Statement, Proshare Research

 

ABC Transport - Leverage Ratio

For a highly capital-intensive company, the debt is expected to be twice the total equity - which means the company is expected to be highly leveraged. However, analysis has shown that the Company has diversified its operations and deals in selling of vehicles which drove the earnings upward for 9months 2020. Looking at its counterparts in the US which recorded a leverage ratio of 0.71 in the debt-to-equity ratio in 2019, one would say the Company is not highly leveraged because of its various revenue segments.

 

Historically, ABC Transport's leverage ratio has always been low. However, in Q3 2020 its leverage ratio was 0.83, the highest the Company recorded during the period under review. This was because of a +6.46% increase in total debt despite the -12.69% decline in total shareholders' equity (see Chart 68).


Chart 68: ABC Transport Leverage Ratio 2019 - 2020

Proshare Nigeria Pvt. Ltd.

Source: ABC Transport Financial Statement, Proshare Research


Watch Video

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Downloadable Version of Goodbye 2020, Hello 2021, Understanding the Mega Trends of a Crucial Year for an Economy Report (PDF)

1.     Complete Report: Outlook 2021: Understanding the Mega Trends of a Crucial Year for an Economy- Jan 28, 2021

2.     Executive Summary: Outlook 2021: Understanding the Mega Trends of a Crucial Year for an Economy- Jan 28, 2021


Proshare Nigeria Pvt. Ltd.


Related Links

1.      Outlook 2021: Understanding 2021's Mega Trends

2.       Outlook 2021: Emerging Technologies Have Potential to Spur Growth

3.       Outlook 2021: A Gaze into Market Performance - Nigeria and the Commodities Market

4.       Outlook 2021: A Gaze into Market Performance - Equities Market

5.       Outlook 2021: A Gaze into Market Performance - Fixed Income and Currency Markets

6.       Outlook 2021: How Sectors of the Economy Fared in 2020 - Transportation Sector

7.       Outlook 2021: How Sectors of the Economy Fared in 2020 - Finance and Insurance Sector

8.       Outlook 2021: How Sectors of the Economy Fared in 2020 - Telecommunication Sector

9.       Outlook 2021: How Sectors of the Economy Fared in 2020 - Oil and Gas Sector

10.  Outlook 2021: How Sectors of the Economy Fared in 2020 - Agriculture Sector

11.  Outlook 2021: How Sectors of the Economy Fared in 2020 - Manufacturing Sector

12.  Outlook 2021: A Review of Monetary and Fiscal Policies Introduced in Nigeria in 2020

13.  Outlook 2021: Inside a Perfect Storm: Monetary and Fiscal Sword Fencing -Monetary Policy

14.  Outlook 2021: Inside a Perfect Storm: Monetary and Fiscal Sword Fencing - Nigeria's Fiscal Policy

15.  Outlook 2021: The Year 2020 in Retrospect - A Bleak Year for Households

16.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - Exchange Rate

17.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - Nigeria's Public Debt

18.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - Trade Balance

19.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - Capital Inflow

20.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - Unemployment

21.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - GDP

22.  Outlook 2021: Eyeballing Major Economic Indicators in 2020 - Inflation

23.  Outlook 2021: Examining Global Economic Indicators - Trade

24.  Outlook 2021: Examining Global Economic Indicators - Unemployment Rate

25.  Outlook 2021: Examining Global Economic Indicators - Inflation Rate

26.  Outlook 2021: Examining Global Economic Indicators - GDP

27.  Outlook 2021: Examining Global Economic Indicators - PMI

28.  Outlook 2021: Fiscal and Monetary Measures Were Applied to Cope With the Effect of COVID-19

29.  Outlook 2021: Understanding the Mega Trends of a Crucial Year for an Economy


Proshare Nigeria Pvt. Ltd.


Related News on Growth and Recovery

1.       African Statistical Yearbook 2020: Africa Experienced Strong GDP Growth from 2000 to 2019

2.       How Countries Are Performing on the Road to Recovery

3.       World Bank Appears Less Optimistic About Growth Prospects Across the Globe

4.       Corruption and COVID-19: The Pandemic Has Heightened The Importance of Stronger Governance

5.       Global Output Expected to Expand by 4% in 2021, Still Below Pre-Pandemic Trend

6.       AfDB Takes Steps to Accelerate the Circular Economy in Africa

7.       World Bank Group to Boost Nigeria's Efforts to Reduce Poverty

8.       IMF Staff Completes 2020 Article IV Mission to Nigeria

9.       Open Trade and Economic Inclusion Key to Post-COVID Recovery

10.  AfDB's AgriPitch Competition Awards $120,000 in Prizes to African Youth Agripreneurs

11.  Bridging the Digital Divide to Scale Up the COVID-19 Recovery

12.  AfDB, AIF Founding Partners Announce Postponement of the Africa Investment Forum to 2021

13.  Remittance Flows to Shrink 14% by 2021 Due to COVID-19

14.  How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies

15.  SSA October 2020 Regional Economic Outlook: A Difficult Road to Recovery

16.  Communique of the 42nd Meeting of the IMFC Chaired by Mr. Lesetja Kganyago

17.  WEO: A Long and Difficult Ascent - Global Growth Projected at -4.4% in 2020

18.  IMF Executive Board Approves the Extension of Increased Access Limits Under the RCF and RFI

19.  IMF Extends Immediate Debt Service Relief for 28 Eligible Low-Income Countries for 6-months

20.  Reform of the International Debt Architecture is Urgently Needed

21.  African Development Bank Named to the Board of World Business Angels Investment Forum

22.  COVID-19's Negative Impact on Health and Education May Last Decades

23.  Opening Remarks at the 2020 International Conference on Sustainable Development

24.  World Bank Sets Ambitious Targets for Green and Resilient Economic Growth in Africa

25.  Supporting Migrants and Remittances as COVID-19 Rages On

26.  IMF Managing Director Georgieva's Remarks at the Global Steering Group Global Impact Summit

27.  Supporting Public Private Partnerships in Africa: AfDB Ready to Scale Up

28.  Event of the Finance Ministers on Financing for Development in the Era of COVID-19 and Beyond

29.  Nigeria in the Time of COVID-19 - Rising to the Challenge

30.  Final Communique of the 55th AGM of the Board of Governors of AfDB

31.  COVID-19: Without Help, Low-Income Developing Countries Risk a Lost Decade

32.  2020 Annual Meetings of the AfDB: A Renewed Commitment to Economic Resilience in Africa

33.  Tourism Trauma and COVID-19

34.  COVID-19: Youth Resilience is the Boost We Need Right Now

35.  External Sector Report: Global Imbalances and the COVID-19 Crisis

 

Proshare Nigeria Pvt. Ltd.


CMO Reports

1.       Nigeria: 2021 Full Year Outlook - Awaiting Dawn

2.       Bracing for a Different Future - Meristem Annual Outlook 2021

3.       2021 Economic Outlook - Light at The End of The Tunnel

4.       The Nigerian-British Chamber of Commerce 2021 Economic Outlook

5.       Q1 2021 FX Outlook: Risk-on Stages a Comeback

6.       Nigeria Economic Outlook 2021: A Shot at Recovery

7.       2021 Outlook - Is The Tunnel Getting Darker or Brighter

8.       Nigeria in 2021: Positioning in the New Normal

9.       Nigeria 2021 Outlook - Navigating Unsteady Terrain

10.  Nigeria FY 2021 Macroeconomic Outlook - A Break in the Clouds

11.  Nigeria 2021 Outlook: COVID-19 Recession and the Long Road to Economic Recovery

12.  Q4 2020 Economic Outlook: Out of Reverse and into Second Gear

13.  Nigerian Equity Market Outlook: COVID Out, Riots In?

 

 Proshare Nigeria Pvt. Ltd.


Related News on Reviews and Outlooks

1.       Candid Dialogue on Africa's Investment Landscape

2.      Negative Outlook for Sub-Saharan African Sovereigns as Debt Costs Will Intensify Post Pandemic

3.      The Nigerian-British Chamber of Commerce 2021 Economic Outlook

4.      Fitch Revises Coronation Merchant Bank's Outlook to Stable; Affirms IDR at 'B-'

5.      Moody's - Nigeria's Deficit and Debt to Stay High After Coronavirus and Oil Shocks

6.      Moody's Takes Ratings Actions on 32 Banks in Africa Following Update to Country Ceilings Methodology

7.      Risks to Nigerian Banks' Asset Quality Loom in 2021 and Beyond

8.      Moody's Announces Changes in Country Ceilings Following Methodology Update

9.      Fitch Ratings Sees Gradual Recovery for African Banks in 2021

10.   DCSL to hold its 13th Webinar Series Focused on the Year 2020 Business Review

11.    Uncertain Recovery: 10 Macro Trends That Will Shape 2021

12.   Fitch Affirms Seplat at 'B-'; Outlook Positive

13.   Agusto and Co Unveils its 2020 Consumer Digital Banking Satisfaction Index


 Proshare Nigeria Pvt. Ltd.

 

Related News on Monetary Policy

1.       Monetary and Interest Rate Policy in 2021: Going for Growth

2.      CBN to Sustain Expansionary Monetary Policy Till Q1, 2021 - Cordros Securities

3.      Ten MPC Members, One Shared Outlook

4.      Further Slowdown in PSCE Growth in November 2020

5.      Personal Statements By The MPC Members At The 133 MPC Meeting of Nov 23-24, 2020

6.      CBN Rolls the Dice to Tackle Market Liquidity and Dollar Dearth

7.      Implications of CBN's Introduction of Its Special Bills to the Market

8.      CBN Introduces Special Bills to Deepen the Financial Markets, An Additional Liquidity Mgmt Tool

9.      Faltering Increases in Private Sector Credit Expansion

10.   Post-November 2020 MPC View: Back to the Committee's Favoured Stance

11.    CBN Communique No. 133 of the MPC Meeting - Nov 23-24, 2020

12.   As Expected, MPC Retains All Key Parameters At The End of November 2020 Meeting

13.   Monetary Policy Committee Decision Preview: MPC Expected to Retain Policy Parameters - Access Bank

14.   A Pause to Reflect from the MPC

15.   LDR Policy: Over One Year After, Where Are We?

16.   Monetary Policy Response in Emerging Market Economies: Why Was it Different this Time?

17.    Endorsement of the CBN's Development Finance

18.   Slowdown in the Expansion of PSCE

19.   Personal Statements By The MPC Members At The 132 MPC Meeting of Sep 21-22, 2020

20.  MPC Surprise Rate Cut: Limited Impact on Credit Growth

21.   LDR Policy: Plausible But Insufficient to Stimulate Growth

22.  Banks Lend, the CBN Pushes Forbearance

23.  Low Liquidity Expected to Dampen Impact of Lower Rates

24.  Possible Implications of MPC's 100bps Policy Rate Cut

25.   CBN Communique No. 132 of the MPC Meeting - Sep 21-22, 2020

26.  CBN MPC Reduces MPR to 11.50%, Retains Other Parameters After Sept 2020 Meeting

27.   An Eye into Possible MPC Outcomes

28.  MPC Preview: Balancing FX Stability and Moderating Economic Contraction

29.  Several Pointers to Same Again From the MPC

30.  Implications of CBN's Downward Review of the Interest Rate on Savings Deposit


 Proshare Nigeria Pvt. Ltd.


Related News on Fiscal Policy

1.       Nigeria Fiscal Guide 2020

2.      SERAP Calls for Simplification of Government Processes for COVID-19 Management in Nigeria

3.      SERAP Calls for No Budget Allocation to MDAs That Fail to Remit to Federation Account

4.      FGN Revises Excise Regime and Removes Import Duty on Materials Used in The Production of Banknotes

5.      DMO Clarifies China's Loans to Nigeria; Economic Viability and Revenue Issues Left Out

6.      Taiwo Oyedele To Speak on Nigeria's Fiscal Sustainability Tomorrow on WebTV

7.      Suleyman Ndanusa To Speak on Nigeria's Revenue Diversification Tomorrow on WebTV

8.      Addendum to the 2020 - 2022 MTEF and Fiscal Strategy Paper

9.      LCCI Report Affirms Need for Fiscal Authorities to Act

10.   Framework for the Management of COVID-19 Funds in Nigeria under the Treasury Single Account

11.    COVID-19: Federal Government Exempts Medical Supplies from VAT and Import Duty

12.   Stimulant is Necessary but not Sufficient - FDC

13.   Fiscal Position: Still Critical but Temporary Panacea in Sight

14.   Pick and Mix in Nigeria's Response to the COVID-19 Virus - FBNQuest

15.   FG Adds to Armory for COVID-19 Showdown

16.   COVID-19: Federal Government of Nigeria Announces Fiscal Stimulus Measures

17.    Fiscal and Monetary Responses to COVID-19 Menace: Racing Against Time

18.   FG Launches Financial Transparency Policy Portal

19.   Treasury Single Account - The Puerto Rican Government Earned $49m in Interest Fiscal YTD

20.  Friedrich Hayek and The Price System: The Future Of Classical Liberalism and The Free Market

21.   Economic and Institutional Restructuring for the Next Nigeria - Soludo

22.  How Government Policy Affects Business , Society In National Development and Changing Environment

23.  Nigeria's Fiscal Quandary: A Revenue Problem Or A Debt Problem?

24.  Irrespective of Who Wins 2019 Elections, ERGP Should Be Sustained - Toyin Sanni

25.   2019-2021 MTEF and Fiscal Strategy - First Fiscal Projections Through to 2021

26.  Government Role In The Economy - Differentiating Policies And What Elections2019 Comes Down To

27.   Federal Government releases 2018 Fiscal Policy Measures

28.  Buhari Signs Bills Granting Financial Autonomy To State Assembly And Judiciary; Signs 3 Others

29.  NESG leads Discourse on Low Carbon Investments Opportunities in Nigeria

30.  NESG establishes Nigeria Fiscal Policy Roundtable to help boost government revenues


 Proshare Nigeria Pvt. Ltd.


Related News on Nigerian Economy

1.       Nigerian GDP Better Than Thought

2.      Inflation Spikes Despite Harvest and Land Border Re-opening

3.      Nigeria's Misery Index Rises as Inflation Reaches 15.75%

4.      FGN to Convert CBN Loans to Tradable Securities as Debt Soars

5.      Headline Inflation Increases by 15.75% YoY In December 2020, 0.86% Higher Than November 2020 Rate

6.      FGN's External Debt Service Obligations Reached a Total of US$507m in Q3 2020

7.      Nigeria's High Recurrent Costs, Low Revenue and Escalating Debt Numbers

8.      62.18% of Nigeria's Total Public Debt as of Q3 2020 Was Domestic - NBS

9.      Q4 2020 Macroeconomic and Markets Report - Growth Expectations Remain Gloomy for Nigerian Economy

10.   Rising Crude Oil Prices and the Nigerian Economy

11.    COVID-19 Containment and ESP Implementation Key for Nigeria's Economic Recovery - Prof. Akpan Ekpo

12.   Q3 2020 Debt Stock: World Bank Almost The Largest External Creditor

13.   Headline Inflation to Continue its Runaway Trend in December 2020

14.   FGN's Domestic Debt Service on a Plateau, Totalled N604bn in Q3 2020

15.   Naira Crawling Peg?

16.   PMI Reading No 93: A Seasonal High for the Year

17.    Nigeria's Public Debt Stock as of September 30, 2020 Stood at N32.22trn

18.   The Year 2020 in Retrospect: A Bleak Year for Households

19.   All Commodity Group Import Index Rose by 1.89% in Q3 2020 - NBS

20.  A Year in Two Charts

21.   PMI Readings Show Pessimism in the Month of December 2020

22.  FGN's Q3 2020 Deficit on Target, Spending Compressed

23.  CBN Poll: Respondent Firms Expect the Naira to Depreciate Next Month

24.  Economic Crisis to Sink 7million People into Poverty in Nigeria

25.   Revenue Collection Again Below Benchmark in Q3 2020

26.  CBN Poll: 60.8% of Respondents Believe Nigerian Economy would End Up Weaker if Prices Rise Faster

27.   Interest Rates on the Rise

28.  The Nigeria's FX Crisis: Overarching Consequences of Insecurity and Structural Deficiency


 Proshare Nigeria Pvt. Ltd.


Special Reports & Publications

1.      Oil and Gas: Working the New Normal in the Time of a Pandemic

2.     Banks in H1 2020: Imagining Beyond COVID-19

3.     Online Trading Ranking Report 2020 - Trading in a Period of a Virus; Building Good Habits

4.     Banks in H1 2020: Imagining Beyond COVID-19

5.     CEO Remuneration 2020 Report: Between 2019 and 2020; Understanding The New Realities

6.     Memo To AMCON: Nigerian Tax Payers are not Responsible for Repayment of Bad Debt

7.     Coronanomics (1) - Understanding the Realities of an Impending Recession

8.     Bank NPLs  - The Case for a New Industry Approach

9.     NCM2020 - Fin. MKT in Transition: Understanding Past Uncertainties; Preparing for New Possibilities

10.  Banks' H1 2019 Numbers: Top Line Growth, Bottom Line Uncertainty

11.   Budget 2019: The Hidden Monsters

12.  Surviving Uncertain Times in the Nigerian Financial Market

13.  The Rich, The Poor and Buharinomics

14.  Nigerian Banks- Performance - H1 2018

15.  AMCON and Financial Services Debt Burden in Nigeria

16.  Poverty Tracker and Nigeria: Raising The Red Flag

17.  POCKET Economics: Addressing Income Inequality

18.  The Silent Drug Epidemic: A Gathering Storm

19.  Judging IMF’s Position on Development Indices

20. Money Market: The Folk Road

21.  The Headache of Missing Targets

22. 2018 Outlook on the Nigerian Economy: The Need for an Even Keel

23. Nigeria External Economy and the White Noise of Import Dependency

24. States and the Rising Weight of Debt

25. Money Supply: Reeling from Policy Response

 

 Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

 

READ MORE:
Related News
SCROLL TO TOP