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Agriculture critical in economic diversification —Yuguda

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As Nigeria pursues policies aimed at diversifying the economy, creating jobs and hastening socio-economic development, agriculture has been identified as capable of playing a crucial role in actualizing these lofty objectives.

Director General of the Securities and Exchange Commission, Mr. Lamido Yuguda stated this at the 26th Annual Stockbroker’s Conference with the theme “Capital market and agricultural development in Nigeria: Issues and the way forward held in Benin ,Thursday.

The DG said the theme of this year’s conference, ‘Capital Market and Agricultural Development in Nigeria: Issues and way forward’ could not have come at a better time than now as it showcases the important role the capital market can play in harnessing resources for our nation’s agricultural development.

Yuguda said Nigeria is facing some of its most daunting challenges in recent times, including: Rising inflation, currently at a 17-year high of 19.64 per cent; Declining government revenues arising from crude oil production challenges and Premium Motor Spirit (PMS) subsidy deductions; Concerns around the 33 per cent current rate of unemployment; and Massive infrastructure deficit and resultant decline in productivity.

He said for Nigeria to successfully address these challenges, all must make conscious efforts to fully diversify the revenue base of the economy.

According to him, “The fact that over 70 per cent of the Nigerian populace depends on agriculture as a means of livelihood, mainly at subsistence level, calls for deliberate policies and action plans towards expanding the sector.

“In early recognition of the potentials of the Agricultural Sector, the Securities and Exchange Commission identified the development of the Agricultural Trading Ecosystem as one of its key focus in its 10-year Masterplan 2015-2025, as revised.

The SEC DG said the Commission has been working closely with the Standards Organisation of Nigeria (SON) for the actualisation of a vibrant commodities ecosystem with key focus on deepening the agricultural Sector by developing a grading and standardization system that will align with international best practice, which is an important precursor in achieving vibrancy in agricultural and other commodities markets.

The Commodities Trading Ecosystem Roadmap he said,  would ensure compliance with established grades and standards, reduce the proliferation of sub-standard agricultural commodities in the markets, and encourage global acceptance of commodities produced in Nigeria, among other benefits.

“Currently, the Commission has developed Rules on commodities trading in Nigeria as well as a Framework for regulating the Commodities space. The Commission has registered five  Commodities Exchanges offering several products and many Capital Market Operators authorised to transact on the Exchanges.

“The Capital market holds tremendous value proposition for the agricultural sector. The capital market provides an alternative source of funding to bank financing.  It offers funding for riskier agricultural activities that would traditionally not be financed by traditional banks. The capital market also ensures the transparent utilisation of the funds raised for agriculture thereby accelerating the growth of the agricultural sector and the creation of wealth along the agricultural value chain,” he stated.

Yuguda added that the Conference provides an opportunity to discuss financing challenges in the agricultural sector and to proffer workable solutions for long-term value creation and sustainable growth.

In his address, the Governor of Edo State, Mr. Godwin Obaseki described the theme as very apt as it resonates with the efforts of the State Government to open up the state’s agricultural sector for private investment.

According to him, “Nigeria’s economic growth is hinged on a vibrant private sector, which is propped by a thriving capital market. With the recent shocks witnessed in the country as a result of uncertainties in the global market, such as the Russia-Ukraine war, and fluctuations in oil prices. It would take an innovative mix of financing options to engender sustainable growth within the local economy. It is for this reason that discourse such as these are important to provide insight and direction in the diversification of the economy.

Represented by Head of Service Edo State, Mr. Anthony Okungbowa, Obaseki said stockbrokers play a critical role in directing the flow of investment into various sectors of the economy and urged them to consider the impact the increased investment in the oil palm sector can make in rejuvenating the Nigerian economy bearing in mind that cash crops such as oil palm, rubber and timber among others were mainstay of the  economy at a time.

He therefore called on Nigerians to look inwards in the quest to diversify the economy as nation with the Edo example standing as a litmus test.’’

President and Chairman of Council, Chartered Institute of Stockbrokers, Mr. Oluwole Adeosun in his remarks, urged the Federal Government to revisit the issue of Capital Gains Tax and restore the exemption of Nigerian equities that lapsed last year.

He said that exemption granted in 2012 was a particularly important action by the Federal Government of Nigeria which helped to bring a reasonable level of stability to our fledgling market. We are not yet out of the woods, so the market is not yet ripe for Capital Gains Tax.

Adeosun said the Capital Market plays a pivotal role in the economy of any nation, especially as both governments and organisations at various levels harness it to mobilize long-term capital for their broad and varying needs, making people with ideas become entrepreneurs and helping small businesses grow into big  company.

“Likewise, it is an avenue for wealth creation and distribution, since individuals, corporates, and governments at various levels, can participate in the fortune making and distribution, as they provide us with opportunities to save and invest for our futures. Agriculture is a medium/long-term investment, and the capital market is a market to raise long-term capital.

“It is therefore extremely critical for all stakeholders who desire to maximise the full benefits of agriculture which include, but not limited to, providing food security, generating foreign exchange, and youth employment, to understand that the capital market should be the major source of agricultural funding,” he added.

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SEC, Capital Market Community to address challenges in the sector

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By Matthew Denis

The Securities and Exchange Commission (SEC) has disclosed that the Capital Market Committee (CMC) for the first quarter of 2024 is scheduled to be held virtually on Thursday, 18TH April 2024 to discuss challenges, brainstorm ideas and make informed decisions about the progress of the Nigerian capital market.

Critical issues about the capital market will be extensively dealt with at the meeting, the SEC stated.

According to the SEC, there will be a presentation of updates on major achievements from the various technical Committees such as Commodities Ecosystem Implementation Committee, E-Dividend and DCS, Financial Literacy and Non-interest Capital Market FLTC and many others driving the implementation processes of the Capital Market Master Plan.

CMC is an industry-wide committee comprising the SEC, representatives of capital market operators and trade groups, and other stakeholders.  The committee is a forum where stakeholders come together to engage in insightful discussions concerning the critical factors that impact the growth and organised functioning of the capital market, address the foremost concerns influencing the capital market, and work together to shape its future.

It was primarily established to serve as a medium for the exchange of ideas among market stakeholders as well as an avenue for providing feedback to the SEC on how to continuously address challenges, improve market operations, and enhance the regulatory framework.

Expected participants at the CMC meeting include Chief Executive Officers (CEOs) of all registered capital market firms (i.e. Broker/Dealers, Investment Advisers, Custodians, Fund/Portfolio Managers, Receiving Banks, Issuing Houses, Rating Agencies, Registrars, Reporting Accountants, Trustees, and Capital Market Consultants, etc.).

Others are Chief Executive Officers of Nigerian Exchange Group (NGX), National Association of Securities Dealers (NASD); FMDQ Group Plc; Africa Exchange Holdings (AFEX); Nigeria Commodity Exchange (NCX); Central Securities Clearing System (CSCS); as well as representatives of relevant financial sector regulatory agencies, among others.

The usual interface with members of the Press will be held the following day Friday, 19th April 2024 through a Webinar.

Attendance at both events is strictly by invitation. All invited participants are expected to be seated by 9:45 am.

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BUA Foods Plc: Revenue rises 74.36%, as operating costs escalate in FY 2023

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The performance of Nigeria’s consumer goods companies in 2023 showed increasing divergence in performance and profitability positions as the effect of challenging macroeconomic conditions continued to impact operational costs and profitability positions of consumer goods industry players.

Despite these challenges, BUA Foods Plc demonstrated remarkable resilience, mirroring its strategy, and delivering double-digit growth.

The spectre of inflation loomed as businesses raised prices to cover surging input, operational, and finance costs. currency devaluation, escalating energy expenses, and heightened insecurity also remained elevated in 2023.

Households grappled with dwindling disposable incomes, eroding their purchasing power, and altering consumption patterns compared to preceding years.

The impact of this economic strain was acutely felt by lower-income households, while even those of average means found themselves grappling with the pervasive effects of rising inflation and challenging macroeconomic conditions.

In an outlook statement for 2023 and while delivering the FY 2022 financial report of BUA Foods Plc, Ayodele Abioye, the managing director of BUA Foods Plc, stated that “we remain resolute to navigate the numerous business headwinds to continue delivering double-digit growth with a sustained focus on our market expansion strategy across our business segments.”

This unwavering focus on strategy is what sets BUA Foods Plc apart, leading to its highest sector market capitalisation at N6.84 trillion and its position as one of the most profitable FMCG companies listed on the Nigerian Exchange Limited (NGX).

Revenue and Profitability

BUA Foods Plc’s revenue continued its upward trend, as seen in the past four years. The company’s revenue grew by +74.36 percent to N729.44bn in FY 2023 from N418.35bn in FY 2022. Major contributors to the FY 2023 revenue were the sale of sugar (Fortified), flour and pasta, contributing 86 percent of the FY 2023 revenue. Despite +75.60 percent growth in operating profits to N206.32bn in FY 2023 from N117.49bn, growth in selling and distribution expenses and finance cost by +110.36 percent and +1,054.59 percent to N29.85bn and N100.68bn respectively had a major impact in squeezing pretax returns which grew only by +0.83 percent to N108.12bn FY 2023

Segmental Performance

In 2023, sugar (fortified) emerged as the primary driver of revenue growth for BUA Foods, closely followed by bakery flour and sugar (non-fortified). Molasses, the byproduct of the sugar refining process, made the smallest contribution to revenue.

Despite its significant growth, the wheat bran segment ranked fourth in revenue contribution. Nevertheless, the wheat bran segment holds promise within BUA Foods’ vertical integration strategy and segmental growth initiatives, showing notable potential for future revenue growth

Financial Position

The company’s assets rose by +76.28 percent in FY 2023 to N1,070.44bn from N607.22bn in FY 2022. Asset growth in FY 2023 is attributable to inventory growth, cash and cash equivalents, and, due from related parties, growth by +277.27 percent, +211.30 percent, and +265.60 percent, respectively. BUA Food’s Liability increased by +114.84%, driven by a +207.59 percent growth in total borrowings.

Shareholders’ equity capital climbed by +13.46 percent as growth in returns saw retained earnings grow by +13.95 percent in FY 2023 to N262.06bn from N230.96bn in FY 2022.

Cash Flow

BUA Food Plc’s cash position rose by +259.75 percent as cash and cash equivalents increased to N99.55bn in FY 2023 from N27.67bn, supported by a +212.06 percent growth in current borrowings.

Cash generated from selling the companies’ products and services increased as cash from operating activities rose by +21.72 percent from N124.47bn in FY 2022 to N151.51bn in FY 2023. Net cash received from investment activities grew to N34.59bn in FY 2023 from N15.44bn in a corresponding period in 2022.

Ratios

The fiscal year 2023 witnessed notable enhancements in BUA Foods Plc’s capability to fulfil its short-term obligations, as evidenced by improvements in the current and acid test ratios.

Specifically, these ratios advanced to 0.91 and 1.41, respectively, from 0.90 and 0.81 in the previous fiscal year.

However, the company experienced increased operational and financial costs, leading to a decline in the return on equity (ROE) by -4.57bps to 10.47 percent in FY 2023 from 15.04 percent in 2022. Similarly, the return on assets (ROA) observed only a marginal increase of +3.23bps in FY 2023, reaching 42.78 percent compared to 39.55 percent in 2022.

While the gross profit margin (GPM) expanded to 35.71 percent in FY 2023, reduced net earnings during the same period resulted in a decline of -6.47bps in the net profit margin (NPM) to 15.37 percent, down from 21.83 percent in the corresponding period in 2022.

Notably, BUA Foods Plc experienced a decrease in inventory turnover in FY 2023, with inventory growing to N112.28bn from N29.76bn in 2022. This inventory growth could have contributed to higher storage and holding costs for the FMCG industry leader.

Conclusion

Nigeria’s FMCG sector has been pressured by rising operating costs, growing inventories (probably because of lower demand), and steeper debt. The combination of these factors has doused investor enthusiasm. This does not imply that investors are largely pulling away from the sector, but they are looking closer at how economic fundamentals will affect the sector’s future earnings. Several suppliers have bitten the dust as rising costs and increased insecurity from farm gates to factory floors have squashed profit margins. Insecurity has led to a large pullback in miller suppliers, raising the cost of flour products and exported goods.

A sustained rise in the foreign exchange rate in 2023 led to FMCGs’ foreign exchange losses and put pressure on their costs of goods sold (COGS). Analysts expect the situation to be less severe in 2024 as the naira strengthens against other global currencies.

However, for FMCGs to reduce inventories and lower their prices to encourage higher domestic demand, the domestic security situation must improve, and multiple logistics levies must be tackled.

According to a manager at one of the companies who requested anonymity, ‘with energy costs going up (the federal government has approved a 200% increase in energy tariff for band A power sector consumers), FMCGs will see further operating cost pressures on their bottom lines. Profit margins may be squashed like pancakes.’

He further observed that ‘FMCGs will have to pull out all the stops to get several costs down. BUA has some temporary tax shields from its pioneer status for its pasta and flour milling plants, but the reliefs have started ticking down from last year; the truth is that depending on temporary reliefs for a strategic plan is like swimming in the ocean until the tide runs out, then we will know whose swimming shorts are dangling around their ankles.’

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Equity market: Investors lose N412bn

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Losses in the stocks of Dangote Sugar, Guaranty Trust Holding Company (GTCO), among others have further weakened the performance of the equity market of Nigerian Exchange Ltd. (NGX).

Specifically, investors lost N412 billion or 0.71 percent, as the market capitalisation, which opened at N58.276 trillion, closed at N57.864 trillion.

Similarly, the All-Share index shed 0.71 percent or 733 points to settle at 102,314.56, as against 103,047.23 recorded on Monday. Consequently, the Year-To-Date (YTD) return dropped to 36.83 per cent.

Profit taking in some banking stocks such as: FBN Holdings (FBNH), Zenith Bank, Access Corporation, as well as United Capital, Nestle, Eterna Plc, among other stocks pushed the market performance further to a negative terrain.

Market breadth also closed negative with 36 losers and 12 gainers on the trading floor of the Exchange.

On the losers table, Dangote Sugar and GTCO led by 10 per cent each to close at N53.10 and N41.40 per share, respectively.

Flour Mills lost 9.87 percent to close at N33.80, Multiverse declined by 9.84 percent to close at N13.75 and FTN Cocoa Processors depreciated by 8.82 percent to close at N1.55 per share.

Conversely, Transcorp led the gainers table by 9.93 percent to close at N14.95, Morison Industries Plc followed by 9.87 percent to close at N2.56 per share.

Also, Oando Plc added 9.61 percent to close at N12.55, Caverton advanced by 8.54 percent to close at N1.78 and Deap Capital Management rose by 7.94 percent to close at 68k per share.

However, analysis of the market activities showed trade turnover settled higher relative to the previous session, with the value of transactions up by 569.96 percent.

A total of 734.04 million shares valued at N21.59 billion were exchanged in 12,491 deals, compared to 245.86 million shares valued at N3.22 billion, exchanged in 5,302 deals traded in the previous session.

United Bank of Africa (UBA) led the volume chart with 148.88 million shares traded in deals worth N4.01 billion.

Zenith Bank traded 135.81 million shares valued at N5.48 billion, GTCO sold 98.76 million shares worth N4.13 billion, Transcorp transacted 71.43 million shares worth N998.48 million.

Access Corporation also sold 44.31 million shares valued at N868.1 million.

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