HOW CASH SHORTAGES AND THE FX CRISIS HINDER BUSINESSES' GROWTH IN THE FIRST QUARTER

Despite the economy's difficulties in the first half of the year, a few businesses outperformed forecasts. The economic downturn has, however, had an impact on a large number of people.

An examination of the half-year reports of many companies listed on the Nigerian Exchange Limited indicates a mixture of outstanding profits and large losses totaling billions of naira.

Nigerian companies have experienced a number of macroeconomic challenges in the first half of 2023, which have significantly impacted their operations and bottom lines.

Many businesses blamed a cash shortage at the end of the first quarter on the Central Bank of Nigeria's failing naira redesign program, which had started in late 2022. However, many businesses and people were still struggling with a cash shortage in 2023 as a result of the damage.

It had an impact on enterprises in a number of ways, including an increase in operational costs, which cover things like selling and distribution costs as well as administrative and general costs.

For instance, BUA Foods had its overall operating expenses increased by almost four times, from N2.23 billion in Q1, 2022 to N8.9 billion at the end of Q1, 2023, despite reporting a profit after tax of N40.468 billion at the end of the first quarter.

Ayodele Abioye, the company's managing director, responded, saying: BUA Foods Plc continues to deliver strong performance across key financial metrics despite the business climate headwinds characterised in Q1 by the economic impact of the general elections, high food inflation, and shortage of cash in circulation as a result of the currency redesign policy. We keep utilizing our distinct strategic business.

The Manufacturers Association of Nigeria said in a statement that a 25% decrease in sales was the result of the cash constraint in March.

The uncertainty and increased security worries that followed the 2023 general election had a substantial impact on businesses operating in the nation.

Bola Tinubu's election as president presented additional difficulties for industry. The President announced the withdrawal of the fuel subsidy during his inaugural address on May 29, which caused the price of gasoline to more than triple, from N197 per liter to N617 per litre.

Additionally, President Tinubu disclosed plans to unify the nation's several foreign exchanges rates. And in keeping with his word, on June 14, the Central Bank of Nigeria said that all the money

Segmentation elimination. Currently, the Investors and Exporters (I&E) pane contains all segments. “Deposit money banks would continue to process applications for medicals, school fees, BTA/PTA, and SMEs,” a circular from the CBN's Financial Markets Department directed by Angela Sere-Ejembi stated.

As a result of these government initiatives, certain publicly traded companies have suffered losses amounting to billions of naira.

The harmonisation of foreign exchange was cited by Airtel Nigeria Plc, whose second-quarter report was released on Thursday, as the cause of its $151 million loss.

“Profit after tax was negative ($151 million), driven primarily by a foreign exchange loss of $471 million recorded in finance cost before tax and $317 million after tax due to the devaluation of the naira in the month of June 2023,” the telecom company reported. This impact has been labeled as an extraordinary non-operating item.

In the first half of 2023, Ecobank Transnational Incorporated, a banking company, recorded profit before tax in the Nigerian market of $29 million, up from $16 million in the same period the previous year, a 77% increase.

However, its operating costs in Nigeria increased to $104 million in the second quarter, up 10%, primarily due to consumer price inflation that accelerated after fuel subsidies were eliminated and the currency rate was changed.

Speaking on the results, Jeremy Awori, the chief executive officer of Ecobank Group, identified one of the factors that affected the pan-African lender's numbers as weak currencies.

According to him, “We achieved these results despite continued challenging macroeconomic conditions in the second quarter, with significant weaknesses in African currencies, high consumer prices, and tepid economic growth.”

FBN Holdings, another financial institution, reported N187.24 billion in profit in the first half of 2023, a 231% rise from N56.60 billion in 2022. This revenue came from interest income as well as fee and commission income.

For the financial year, however, foreign exchange income trended in the wrong direction, falling short by N98.42 billion.

Compared to the same period in 2022, when it posted N 2.34bn, consumer products manufacturer Cadbury Nigeria Plc reported a N14.54bn loss in its Unaudited Interim Financial Information for the half year ended 30 June 2023.

However, compared to the earlier time in 2022, when it was under review, its revenue climbed by a little more than a quarter to N35.61 billion from N27.88 billion. The cost of sales increased from N22.02 billion in June 2022 to N25.38 billion, which had an impact on the revenue.