Kayode Tokede
Following double-digit inflation and depreciation of the naira at both official rate/ parallel markets, MTN Nigeria Communication Plc, Access Holdings Plc and 20 other companies in Nigeria recorded a 19 per cent increase in Operating Expenses (OPEX) in the first quarter of 2022.
THISDAY analysis of the companies’ unaudited first quarter result and accounts for period ended March 31, 2022 revealed that the spike in OPEX impacted on profits.
The 22 companies listed on the Nigerian Exchange Limited (NGX) announced a total of N1.06 trillion OPEX in Q1 as against N891billion announced in Q1 2021 unaudited results published by the NGX.
The investigated companies constitute 13 Deposit Money Banks (DMBs), three cement manufacturing companies, one telecommunication company, two oil/gas companies, among others.
Analysis of the 22 companies’ performance revealed that MTN Nigeria Communication Plc, followed by Access Holdings Plc, Ecobank Transnational Incorporated (ETI) recorded the highest OPEX in Q1 2022.
A breakdown revealed MTN Nigeria reported OPEX of N214billion in Q1 2022, an increase of 18.3 per cent from N180.77billion reported in Q1 2021, while Access Holdings grew its OPEX by 28.08 per cent to N117.19billion in Q1 2022 from N91.5billion in Q1 2021.
The Chief Executive officer, MTN Nigeria, Karl Toriola in a statement said : “We continue to progress with our expense efficiency programme (through which we realised N6.3 billion in Q1) and remain disciplined with capital allocation. As a result, we contained the 15.7% increase in operating expenses below the rate of inflation in Nigeria. This was achieved despite the ongoing effects of Naira depreciation on lease rental costs and acceleration in our site rollout.”
The Group Managing director, Access Holdings, Mr. Herbert Wigwe during investors/analysts presentation early in the year said that the Holdings, “OPEX growth was mainly driven by the recent expansion in Zambia, Kenya, South Africa, Mozambique and Botswana and of course the new subsidiary we have in Guinea.
“The acquisitions that we made brought with it increased operating expenses from the various entities that we have before we start revving up the revenues derived from those entities.”
ETI’s OPEX had grew by nearly eight per cent to N105.32billion in Q1 2022 from N97.63billion reported in Q1 2021.
The growth in OPEX of these 22 companies is on the backdrop of Nigeria’s inflation rate that jumped to 15.92 per cent in March 2022, highest in five months, according to the National Bureau of Statistics (NBS).
The bureau also had stated that Nigeria’s inflation rose to 16.82 per cent in April 2022, following a similar uptick recorded in the previous month as a result of the increase in energy and food prices. This represents the highest rate recorded since August 2021.
According to analysts at the Economist Intelligence, prices of global commodities, including energy, are rising rapidly and fueling runaway inflation and instability in much of Africa including its most populous nation Nigeria.
They added that the cost of living crisis is being exacerbated by the Russia-Ukraine conflict which have resulted in sanctions, airspace bans and security aggravating pandemic-related supply-chain difficulties.
Besides inflationary pressure, the marginal increase in Naira/US dollar exchange rate in the official market also resulted in the hike in general prices of goods and services in the first three months under review.
The Central bank of Nigeria (CBN), Naira at the Investors & Exporters Foreign Exchange (I & EFX) was trading at an average price of N415.54/Dollar from N380/Dollar when it opened for trading in 2021.
Meanwhile, analysts have expressed that cost of buying diesels and trucks materials in the period under review have increased significantly, a major factors also contributing to cost of goods and services distribution.
The CEO, Centre for Promotion of Private Enterprise (CPPE), Dr Muda Yusuf explained to THISDAY that inflationary pressures remain a key concern in the Nigerian economy, both for businesses and the citizens.
He highlighted that implications of high inflation rate include escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilization, high food prices which impacts adversely on citizens welfare and aggravates poverty.
He further stated that Weak purchasing power, which poses significant risk to business sustainability and price volatility, which undermines investors’ confidence are major implications of high inflation pressure.
He explained that the major drivers of inflation and cost in the economy include exchange rate depreciation, which has a significant impact on headline inflation, “especially the core sub index and liquidity challenges in the foreign exchange market impacting adversely on manufacturing output.”
He added, “High transportation costs affecting distribution costs across the country. This is also reflected in the huge differential between farm gate prices and market prices; monetization of fiscal deficit (CBN financing of deficit) is highly inflationary because of the liquidity injection effects on the economy. This becomes worrisome when statutory thresholds are exceeded and high transactions costs at the nations ports increases production and operating costs of businesses.”
To tame the current inflationary pressure, he urged government to reform the foreign exchange market to stabilize the exchange rate and reduce volatility and address foreign exchange liquidity issues through appropriate policy measures.
Others are: “Address the security concerns causing disruption to agricultural activities, address the challenge of high transportation cost, reduce fiscal deficit monetization to minimize incidence of high-powered money in the economy, reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of the sharp depreciation in the exchange rate and address concerns around high energy cost.”
Analyst at PAC Holdings, Mr. Wole Adeyeye in a chat with THISDAY also said that the operating expenses of most companies increased significantly in 2022, driven mainly by higher input costs.
According to him: “The upsurge was witnessed in inputs sourced locally (especially raw materials & consumables, fuel and power consumed, distribution expenses, among others). In addition, most listed companies complained about the depreciation of Naira as it raised cost of imported raw materials during the period.
“The high cost of imported raw materials and inputs sourced locally resulted in lower profitability of some listed companies, especially those who found it difficult to pass the cost to the final consumers.”
Similarly, some analysts believe regulatory levy by Asset Management Corporation of Nigeria (AMCON), and Nigeria Deposit Insurance Corporation (NDIC), were primarily drivers in commercial banks OPEX.
In his reaction, Head, Financial institutions, Agusto & Co, Mr. Ayokunle Olubunmi had attributed hike in commercial banks OPEX to increasing cost of operating environment, and regulatory costs.
According to him: “Hike in operating expenses differs from banks to banks. AMCON levy and NDIC premium also contribute to OPEX of banks.
“Don’t forget that double-digit inflation rate and fall in the Naira have impacted on companies’ expenses. Since these companies are not operating in isolation, of course it is expected to affect their OPEX in the period.”


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