Profits rainmakers vs. FX blood spills

OLUWATOSIN EMMANUEL OLADETAN

Oluwatosin Oladetan, (MBA, ACCA, PMP, NIM, MICBC, FMVA, BIDA, SPY-SP, TRCN), a vice president (finance), public policy expert, corporate and business strategist, independent director, trusted advisor, is a Volunteering Contributing Analyst with Business a.m.

Nigeria in 2023 and 2024 was very prone to economic uncertainties arising from less government intervention in ensuring stability of the foreign exchange and sustainable energy prices. The real GDP grew y-o-y by 2.74 percent in aggregate for 2023, with the highest growth recorded in Q4-2023. A corresponding aggregate growth rate of 3.40 percent was recorded in 2024, with the highest growth rate of 3.84 percent recorded in Q4-2024. At a sub-sector level, metal ores recorded the highest aggregate growth rate of 50.32 percent in 2023 and 75.23 percent in 2024 due to further exploration of solid minerals in the mining and quarrying sector. At a sectoral performance level, financial services made up of financial institutions and insurance recorded the highest sectoral growth of 26.53 percent in 2023 and 29.57 percent in 2024. The real GDP for 2023 and 2024 was measured having 2010 as the base year, which has been revised to 2019, early January 2025. It infers that the GDP measures in 2025 will be closer in reflecting current realities than they were in 2023 and 2024. From a review of contributions to GDP, the services sector contributed the most to the GDP at 56.55 percent in 2023 and 56.89 percent in 2024, while the industrial sector contributed the least at 18.65 percent in 2023 and 18.47 percent in 2024. On a sectoral growth measure, services had the highest growth rate in both 2023 at 4.18 percent and 2024 at 4.70 percent. The lowest sectoral growth measure for 2023 was industries at 0.72 percent and agriculture for 2024 at 1.19 percent. Crude oil is still very crucial to the development of Nigeria, as the GDP growth rate in oil at 5.54 percent is significantly higher than 3.27 percent in 2024 compared to 2023, when there was a decline rather than a growth in the oil sector at a performance of (2.22%) growth rate due to lower average oil production in 2023.
The GDP analysis presents a very disturbing fact: the major growth driver of the economy is services, for which, over the years, Nigeria has remained a net importer, as there have not been significant investments and developments to increase the demand and need for Nigerian services across the globe. Among the 21 indices available on the Nigerian Stock Exchange is the NGX 30 companies index, which tracks the largest listed companies in terms of market capitalisation and liquidity. The NGX 30 is a price-weighted index adjusted for market capitalisation. The NGX 30 was last reviewed as the market opened on January 2, 2025, resulting in the exit of firms such as Total Nigeria Plc, Flour Mills Nigeria Plc, Guinness Nigeria Plc and Sterling Holding Company Plc, while Conoil Plc, International Breweries Plc, Oando Plc and Transcorp Power Plc were added to the index. The NGX 30 Index consists of firms across financial services, oil and gas, food and beverage, construction, power, telecommunication, hospitality and manufacturing.
Guarantee Trust Holding Company Plc has a market capitalisation of N2.348 trillion, making it the highest among the financial services firms in the NGX 30 with a closing price of N68.8 for the market day ended March 28, 2025. The total number of shares outstanding is 34.137 billion shares. GTCO Plc has its 2024 report on compliance with the Nigerian Code of Corporate Governance 2018 available on the exchange as at March 28, 2025. From the analysis of the financial performance, the firm recorded a net interest income of ₦1.059 trillion (78.89% margin), profit after tax of N1.018 trillion (75.85% margin), and the other income majorly driven by unrealised fair value gain on financial instruments and the net trading gains on financial instruments held at fair value through profit or loss is 110% of the indirect expense consisting of net impairment charge on other financial assets, personnel expenses, depreciation, amortisation and other operating expenses. The basic and diluted EPS is N35.44, which is 85.84% higher than the previous year’s position of N19.07. A review of the statement of financial position shows the deposit from customers increasing by 35.11% to N10.013 trillion, other liabilities increased by 106.82% to N1.020 trillion, and the group became more bullish on holding bond short positions as a financial liability at fair value through profit or loss and cross-currency swap transaction liabilities for a tenor of 2 years to mature in March 2026 at an interest rate of 17% due to CBN, the regulator. The cash and bank balances account for 31.58% of the total assets, and 167.75% of the total loans and advances to customers increased y-o-y by 102.33%. This infers that the firm is exploring other purposes for assets in the short and medium term rather than availing credit to the real sector. The cost of credit in Nigeria has been on the rise, as the current MPR is priced at 27.50%, and the prime lending rate was 18.49% for the month of February 2025, making it very difficult for the real sector players to have access to affordable credit required to increase activity and drive growth in the society.
MTN Nigeria Communications Plc has the second largest market capitalisation of N5.144 trillion in the ICT sector, behind Airtel Africa Plc with the largest capitalisation of N8.106 trillion on the NGX 30. The most recent information about Airtel Africa Plc was not available on the exchange; hence, MTNN will be analysed for the purpose of this paper. MTNN has outstanding shares of 20.996 billion in issue at a market closing price of N245 for the market day that ended March 28, 2025. MTN recorded a gross revenue of ₦3.360 trillion, a 36.13% increase from the previous year. The gross profit for the period was N2.129 trillion (63.34% margin), the operating profit for the group was N778.244 billion (23.16% margin). This attractive profitable position was eroded by finance cost of (N431.648 billion) arising from interest expense on borrowings on supply chain finance, bilateral loan facilities, commercial papers, letter of credits transactions established on credit lines, local bonds, AFC foreign facility, local syndicated facility of (N172.073 billion). The interest expense on leases for network infrastructure (tower space and land), land, buildings, motor vehicles and others were recognised at a value of (N250.869 billion). The net foreign exchange loss arising from foreign denominated borrowings, lease liabilities, trade and other payables, trade and other receivables was recognised at (N925.361 billion) resulting in a net loss of (N400.435 billion or 11.91% margin) for the year 2024. The basic and diluted loss per share was (N19.05), a decrease of 10.82% from (N17.19) the previous year. From the statement of financial position, there was a 188.74% increase in the right-of-use assets arising from leases, of which the non-current portion increased by 145.53%, and the current portion increased by 49.75%. Despite having a very high gross profit margin, the year-on-year devaluation of 41.42% contributed significantly to the loss in the period. There has been relative stability in the foreign exchange volatility between January and March 2025 after the CBN introduced the B-Match System in November 2024, as well as the increase in the telecom fees and charges on calls and data, presenting a profitable position for MTNN in Q1 2025.
Seplat Energy Plc has the highest market capitalisation in the oil and gas sector on the NGX 30, with a value of N3.354 trillion from 588,444,561 shares, which closed at N5,700 for the market day that ended March 28, 2025. From the review of Seplat’s statement of financial performance, Seplat recorded gross revenue of N1.652 trillion in 2024, a 47.97% increase from the position in 2023. The gross profit for 2024 was N710.099 billion (43.00% margin), the operating profit for the period was N647.928 billion (39.23% margin), and the net profit was N214.247 billion (12.97% margin). From the review of Seplat’s statement of financial position, the oil and gas properties increased by 246.30%, intangible assets increased by 259.59% as license costs are incurred in connection with the renewal of a right for exploration of an oil mining lease field. Trade and other receivables increased by 213.53% while the other property, plant and equipment increased significantly from ₦25.744 billion to ₦346.574 billion year on year, inventory increased from N47.154 billion to N725.565 billion, restricted cash increased from N24.311 billion to N202.983 billion, prepayments increased from N9.477 billion to N52.596 billion incurred on rents, short term leases of residential buildings, car parks, office building, advances to suppliers to finance the construction of the Amukpe Escravos pipeline project, other prepayments such as prepaid service charge expenses for office buildings, health insurance, software license maintenance, motor insurance premium and crude oil handling fees. The foreign currency translation reserve from translating the group results and financial position into the presentation currency and from the translation of foreign subsidiaries increased by 91.29%. The non-current element of interest-bearing loans and borrowings increased by 135.14%, while the current portion of interest-bearing loans and borrowings increased by 759.99%. majorly driven by ₦21 trillion, $1.4 billion amortised loan facilities, undrawn $350 million revolving credit facility, newly acquired loans, existing $110 million senior RBL and $50 million junior RBL, such as $650 million senior notes, $110 million senior RBL facility, $50 million RBL facility, $300 million advance payment facility and other exposures. The group entered into lease extension agreements for the office buildings in Lagos, Temple Office, Penthouse, WTC Abuja leases, SEPNU, and Aberdeen office, and a new lease agreement for the London office was recognised at the gross amounts of the lease contracts, increasing the long-term lease liabilities from nil to N88.530 and the current lease liability element from N1.207 billion to N24.415, while the corresponding right of use assets increased from N1.946 billion in 2023 to N198.918 billion in 2024. Provision for decommissioning obligations on oil production facilities, new well drills, facility construction and developments in line with the Competent Person’s Report provided by Ryder Scott and ERCE for all the OMLs increased by 916.96%; trade and other payables arising from field accruals, deposits for assets held for sale, vendor payables, royalties’ payables and over-lifts of excess crude above production share increased by 250.88%. The acquisition of Mobil Producing Nigeria Unlimited (MPNU), renamed as Seplat Energy Producing Nigeria Unlimited (SEPNU), from ExxonMobil in December 2024 creates a new wave for Seplat in sustainably delivering affordable, accessible and reliable energy for Nigeria and the surrounding market.

… to be continued