October 01, (THEWILL) – Six months into its 5-year Strategic Plan (2023-2027), Access Corporation has further raised the bar – consolidating on its prime status as Nigeria’s largest quoted company, by assets, its half-year (HY 2023) results have shown.
Generally, assets expansion slowed down in the banking industry since 2021. This followed the growth in liabilities which weakened the balance sheets, arising from increased credit losses during the COVID-19-induced recession of 2020.
On fast track
However, Access Bank, which transited to a holco structure in March 2022, emerged Nigeria’s largest company with a balance sheet size of N11.7 trillion at the end of 2021. This represented a 35 percent growth – adjudged an unmatched performance in the banking industry and elsewhere, involving more than N3 trillion in assets added in that year.
Indeed, the HY 2023 results showed Access Corporation’s continued exceptional performance in assets expansion over the years. The growth in loan books during the period reflected on the significant rise in gross earnings which climbed to N940.31 billion in the review period from N591.80 in HY 2022, representing a 58.8 percent rise.
Evidently, the group’s HY 2023 performance is reflective of its resilience and underpins the goal to generate sustainable value for its stakeholders as outlined in its 5-year strategic plan unveiled in January 2023.
At the presentation of the plan in Lagos, the Group Chief Executive Officer (CEO), Access Corporation, Mr Herbert Wigwe, emphasised that its expansion programme would be driven by technological innovation. Apparently to maintain its industry leadership narrative.
“By the end of 2027, we expect to be in at least 26 countries and in at least 3 Organisation for Economic Co-operation and Development (OECD) countries supporting trade (in United Kingdom, France & United States of America).
“The customer acquisition drive to hit 100mn for the Retail Business by 2027 will continue, as we emigrate the majority of customers to digital platforms by 2027 across touch-points.”
He added, “We want to be a global player with African heritage. We are a growth-oriented organisation and we will continue to invest in our people amid changes.”
The numbers
Six months into the plan, the group recorded interest income of N318.52 billion specifically from loans and advances to customers as at June 30, 2023 against N238.94 billion in the equivalent year, reflecting a 33.3 percent increase. Its e-business income grew to N43.94 billion from N38.86 billion in HY 2022, showing a 13 percent jump.
The group’s impressive HY 2023 result, was largely as a result of forex gains haul which rose by 362.5 percent to N244.33 billion from paltry N52,83 billion in the corresponding period of 2022. By this, the foremost financial services giant posted a profit before tax (PBT) of N167.60 billion compared to N97.79 billion in HY 2022, representing a rise of 71.4 percent.
On the same growth trajectory, profit after tax (PAT) rose to N135.44 billion from N88.88 billion in the equivalent period of 2022 which is a 52.6 percent jump.
Expansion cruise
In what looks like an escapade on expansion cruise, the group has intensified its expansion strategy through the acquisition of whole or partial entities in banking, insurance, pension and payment services.
Last July, Access Holdings Plc and Standard Chartered Bank announced that they had reached an agreement wherein its flagship subsidiary – Access Bank Plc – will acquire Standard Chartered’s sub-saharan subsidiaries.
Under this acquisition deal, Access Bank will purchase Standard Chartered’s shareholding in its subsidiaries located in Angola, Cameroon, Gambia, and Sierra Leone.
Additionally, Access Bank will also acquire Standard Chartered’s consumer, private, and business banking business in Tanzania. This followed Access Bank’s recent acquisition of a 51 per cent majority equity stake in Finibanco Angola.
Based on the company’s annual report, there are about 13 African subsidiaries with investment at a balance sheet value of about N273 billion as of December 31, 2022
The ‘new arrivals’ will join the many subsidiaries of the bank in the continent to consolidate towards achieving the target of the corporate strategic plan which was one of the reasons for transitioning to a Holco structure.
The existing subsidiaries include:
Access Bank Sierra Leone Limited
Access Bank Rwanda Limited
Access Bank Ghana
Access Bank Zambia
Access Bank South Africa
Access Bank Kenya
Access Bank Botswana
Access Bank United Kingdom
Access Bank Plc also has other smaller subsidiaries in other African countries such as
• Access Bank Cameroon with 100 per cent equity,
• Access Bank Mozambique with a 99.98 per cent stake,
• Access Bank Guinea S.A with 100 per cent equity,
• Access Bank R.D. Congo with 99.98 per cent ownership,
• Access Bank Gambia Limited with 88 per cent stake.
“The financial services institution had transitioned to a Holco with ‘5 verticals’ as a tool to capture the opportunities the African market provides as the landscape evolves over the next few years,” the plan document stated.
GMD speaks
Commenting on the HY 2023 performance, the Group Managing Director, GMD, Access Holdings Plc, Herbert Wigwe said the plan to transform Access Holdings into a leading financial and ecosystem player in Africa remains firm. He added that the financial services provider is resolute in its objective to foster opportunities for shared prosperity with customers and other stakeholders.
According to him, “Our growth plans for the African continent remains firm and clear, driven by the strong long term growth prospects and trade opportunities seen across many of the countries.”
“Continuing with our five-year cyclical strategy, our primary objective remains to transform Access Holdings Plc into a leading financial and ecosystem player, fostering opportunities for shared prosperity` among all stakeholders.”
The group boss added: “In a demonstration of the trust and confidence reposed in the institution by its customers, Access Holdings also witnessed a significant 35% year-to-date growth in customer deposits, concluding the half-year at a commendable N12.5 trillion. This growth was inclusive of all business segments, firmly solidifying the Group’s stature as the largest financial institution in Nigeria by total assets.”
According to the group, its synergies across its business verticals yielded remarkable results, as the company experienced a 39.0 percent year-on-year increase in total assets and a 40.6 percent year-on-year rise in shareholders’ funds.
“As of the mid-year point in 2023, total assets and shareholders’ funds stood at N20.9 trillion and N1.7 trillion respectively.
“These striking figures underscore the efficacy of the group’s strategic approach and its ability to generate value from a diversified business portfolio, spanning banking, asset management, and payment services, operational in twenty countries across four continents.”
Other accolades
Meanwhile, the group’s Pensions business has surpassed the N1trillion in Assets Under Management, AUM, milestone, thereby ranking as the 4th largest PFA by AUM and the 2nd largest by the number of registered retirement savings accounts, RSAs.
Furthermore, its payments vertical, Hydrogen, processed over N3.0 trillion in transactions, achieving a 407 percent month-on-month growth in point of sale, POS, transactions, and 99 percent system uptime on account switching within the period.
Multiple Woes Cripple Manufacturing Sector in HY’23
– 3,567 Job Losses
– N272bn Unsold Goods
– N517bn Forex Losses
Nigeria’s troubled economy is taking its toll on manufacturing which holds the ace for the real sector. The key fiscal and monetary policy reforms introduced by the government in the first half of 2023 are pushing manufacturing firms into multiple troubles that cause job, financial and inventory losses as well as stunted growth.
The Manufacturers Association of Nigeria (MAN) has revealed that a total of 3,567 jobs were lost in the sector in the first six months of 2023. The group stated this in its ‘Half Yearly Review of the Economy (January – June 2023)’ recently released.
According to the report, for the same period in 2022, 1,709 jobs were lost. This represents an increase of 1,855 in job losses in the sector over one year.
The figure also represents an increase of 805 job losses when compared with the 2,708 jobs that were lost in the preceding second half of the preceding year — July to December 2022.
MAN attributed the increase in job losses to the unfriendly business environment and a slew of hastily implemented policies such as the naira redesign that caused the scarcity of notes in the first quarter of the year.
The report read:
“The decline in the number of jobs created in the sector during the period further highlighted the unfriendly business environment resulting from the hasty policies and residual effect of the currency redesign policy that led to naira crunch.”
Based on the association’s report, there was a decrease in capacity utilization, dropping to 56.5% compared to the 57% recorded during the same period in 2022. Additionally, the cost of funds for manufacturers increased to 24% from the previous 22% in the latter half of 2022.
“The continuous upward adjustments significantly influence the lending rates offered by commercial banks to industries in the Monetary Policy Rate,” MAN said.
The report further revealed that Nigeria’s surging inflation rate is making many products unaffordable as manufacturers’ inventory of unsold finished goods rose by 45.4 percent in one year. It stated that inventory of unsold products in the manufacturing sector rose to N272 billion in the first half of 2023 from N187.1 billion in the same period of last year.
According to the document, this indicates a substantial rise of N84.9 billion or 45.4 percent over this timeframe. It stated, however, that this represents an N11.6 billion or 4.1 percent decline when compared with the inventory value of N283.6 billion recorded in H2 2022.
The report said the increase in inventory can be attributed to a weakened purchasing power of the consumers, brought about by diminishing real household income resulting from the ongoing escalation of inflationary pressures, compounded by the scarcity of naira in Q1 and the aftermath of the subsidy removal.
The high cost of dollars and the implementation of a 7.5 percent value added tax (VAT) on diesel imports have pushed its pump price to as high as N1,200 per litre. At the same time, expenditure on alternative energy hit N60.4 billion in H1 2023.
This occurred while the country’s inflation rate rose to an 18-year high of 25.80 percent in August, 2023 from 24.08 percent in July, according to the National Bureau Statistics (NBS).
According to the association, capacity utilisation declined to 56.5 percent from 57.9 percent recorded in the corresponding half of 2022 and cost of funds for manufacturers rose to 24 percent from 22.0 percent in H2 last year.
“The continuous upward adjustments significantly influence the lending rates offered by commercial banks to industries in the Monetary Policy Rate,” MAN said.
The 2023 interim half-year financial results of Nigeria’s manufacturing companies revealed that they are battling for breath as they struggled to lift margins.
Their profit and revenue haul were severely impacted, while the key six cost/expenses indices revealed an average 92 percent increase. The selected key cost areas include Tax Expenses, Cost of Sales, Administrative Cost, Sales/Marketing Distribution, Raw Materials/Inventory and Employee Expenses/Entitlements.
The firms are confronted with a difficult environment that is not likely to improve any time soon. With growing evidence of worsening economic uncertainties as the firms groan under chock of thistles from multidimensional challenges.
These include multiple taxes, high operating costs, rising inflation, low consumer demand, decrepit infrastructure, volatile exchange market, forex scarcity, policy summersault and insecurity among others. The most outstanding impact came from the devaluation of the naira.
The Central Bank of Nigeria (CBN) had on June 14, 2023, announced the unification of the multiple exchange windows of the forex market. This resulted in significant depreciation of the naira by 67 percent to the average of N777/$ (as of August 2023) against N465/$ prior to the announcement.
Also, the naira traded N800/$ at the parallel market compared to N765/$ before the abolition of multiple exchange rates. This development impacted negatively on the operations of firms in the manufacturing sector.
The 2023 half-year financial results of these firms proved they are working a tight rope, and literally trudging the valley of shadow of death. It is obvious that some of them might shut down or drastically downsize soon.
Findings from 10 sampled major manufacturing firms showed they reported a total of N517.1 billion in non-recovery, net foreign exchange losses in the first half of the year (HY 2023), occasioned by the devaluation of the naira.
Nestle Nigeria Plc and Dangote Cement Plc were the worst hit with non-recovery net forex losses of N123.7 billion and N113.6 billion respectively. They are followed by Nigerian Breweries Plc N85.26 billion, Dangote Sugar Refinery Plc N83.09 billion and Guinness Nigeria Plc N41.9 billion.
Others are International Breweries Plc with N40.66 billion, Neimeth Pharmaceuticals Plc N22.82 billion, Unilever Plc N2.93 billion and Cadbury Nigeria Plc N1.03 billion.
The eroding wave of depreciation resulted in total post-tax loss of N370.57 billion by the 10 firms, compared to N175.9 post-tax profit they posted in the equivalent period of the preceding year. The development impacted severely on the balance sheets of Nigerian businesses as they had to source extra funds in local currency to meet their dollar-denominated obligations.
The 10 selected firms suffered huge forex losses which impacted severely on their earnings and drained their bottom lines as inflation rises. This resulted in a total pre-tax loss of N695.03 billion in HY 2023 against pre-tax profit of N637.61 in the corresponding period of 2022.
“It is a bad omen.” said Barnabas Ikuru, an investment and financial analyst. “Their balance sheets have been significantly eroded, their earning power vitiated, and their expansion capacity weakened. Top among the victims are the employees who may be laid off, downgraded or suffer a salary cut. Some companies will have to increase the price of their products and that would impact their sales revenue because of declining consumer power,” Ikuru added.
The MAN’s report also showed that the lingering scarcity of foreign exchange surged prices of local sourcing of raw materials, to the highest in three years for the first half of 2023..
MAN recommends that it is important for the government to re-evaluate its role in local development and production of raw materials in terms of funding.
“The association recommends that the challenges in the manufacturing sector should be promptly and effectively addressed.
“The sector urgently requires measures to mitigate the adverse effects of these policies and restore its growth trajectory,” the report stated.
The association further recommended that the challenges in the manufacturing sector should be promptly and effectively addressed.
“The sector urgently requires measures to mitigate the adverse effects of these policies and restore its growth trajectory” the report stressed.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
