In the first half of 2023, Nigeria’s downstream firms, including Eterna, Total Energies, Conoil, and MRS Oil, faced increasing challenges as input costs claimed a significant portion of their revenue due to rising inflation. BusinessDay’s analysis reveals that these firms experienced a 130 basis point decrease, with input costs accounting for 86.8% of combined revenue, compared to 88.1% in the same period in 2022. This trend highlights the growing impact of inflation on businesses in Africa’s largest economy.
Key Points:
- Eterna’s input costs constituted 87.6% of its total revenue of N69.34 billion, while Total Energies faced 87.2% input costs of total revenue at N274.61 billion.
- Conoil’s input costs accounted for 86% of its N87.14 billion total revenue in H1 2023, and MRS Oil’s input costs were 85.1% of N59.65 billion.
- The combined input costs for these downstream firms recorded a 32.4% growth, amounting to N426.02 billion in H1 2023, driven by double-digit inflation.
- Total Energies saw an increase in input costs, revenue, and profit after tax, indicating the impact of rising inflation on the firm’s financials.
- Conoil experienced growth in revenue and profit for the period, with basic earnings per share also on the rise, reflecting the company’s resilience in the face of inflationary pressures.
- Eterna faced an increase in the cost of sales, a decline in profit after tax, and a change in earnings per share, highlighting the challenges posed by rising inflation.
- MRS Oil recorded growth in input costs, revenue, and profit after tax, demonstrating the company’s ability to navigate the inflationary environment.
Analysis: The data underscores the significant impact of inflation on the downstream sector in Nigeria. These firms are grappling with higher input costs, which not only erode their profit margins but also affect their overall financial performance. It is imperative for businesses to implement effective cost management strategies and explore avenues for operational efficiency to mitigate the impact of inflation. Additionally, policymakers should focus on measures to address inflationary pressures and create an environment conducive to business growth and stability.
BD