At N464.35bn, MTN, NB, Dangote Cement May Exceed Trade & Other Receivables in 2021FY

Kayode Tokede
On the heels of reporting N464.35billion trade and receivable in nine months ended September 30, 2021, the likes of MTN Nigeria Plc, Nigerian Breweries Plc, among other companies might exceed 2020 receivables in this year’s financial results.

Trade and receivables are the amount owed to a business by its customers following the sale of goods or services on credit.
THISDAY checks revealed that companies operating in the country have enhanced loan loss provision amid growing trade & receivables in the period under review.

Specifically, MTN Nigeria in the period under review reported 92 per cent increase in Trade and other receivables to N97.62billion from N50.77billion reported in full year ended December 31, 2020.

The primary contribution to the telecommunication giant’s trade and other receivables was N35.96billion “other non-financial receivables” in nine months of 2021 from N5.9billion reported in 2020.

MTN Nigeria in its unaudited result and accounts to the Nigerian Exchange Limited (NGX) had explained that: “Other non-financial receivables includes the placement of minimum capital with Central Bank of Nigeria (CBN) for Payment Service Bank license and withholding tax receivables.”
In the same vein, Dangote Cement closed nine months of 2021 with N52.19billion trade & other receivables, an increase of about 48 per cent from N35.19billion reported in 2020.

The breakdown of Dangote Cement trade & other receivables revealed Value added tax receivables increase of about 97 per cent to N5.17billion in nine months of 2021 from N2.63billion reported in 2020, while “Other receivables” rose by 101 per cent to N30.85billion in nine months of 2021 from N15.3billion reported in 2020.

The cement manufacturing company reported N226 million impairment of financial assets in the period under review as against N188 million reported in 2020.
On the contrary, BUA Cement reported 33 per cent decline in trade & other receivable to N38.79billion in nine months of 2021 from N83.3billion reported in 2020, while Nigerian Breweries Plc closed nine months with 104.05 per cent increase in trade & other receivables to N23.3billion in nine months of 2021 from N11.42billion reported in 2020.

Analyst at PAC Holdings, Mr. Wole Adeyeye explained that increasing trade & other receivables is an indication of growth in companies operations in the period, stressing that demand in supply often impact on company’s receivables.

According to him, ”Trade & other receivables are an indication that the company is producing the more in a move to meet customers demand. When customers refused to payback, these companies will have to impair such receivable and it becomes a bad debt. For me, the growth recorded by these companies trade & other receivables is a reflection of growing economy.”

Other market analysts attributed hike in trade & receivables to adverse impacts of the Covid-19 pandemic and hike in cost of goods and services.
An Economist & Private Sector Advocate, Dr Muda Yusuf blamed hike in companies’ trade & other receivables on the adverse impacts of the Covid-19 pandemic on businesses and inflation rate.

He noted that all sectors in the nation’s economy was affected by pandemic inflicted shocks that continued to mount pressure on receivables by companies.
According to him: “This reflected in the unaudited financial statements of these companies in 2020FY and nine months ended September 30, 2021. Some businesses are even yet to recover from these shocks.

“Across all sectors, payment defaults increased, sales dropped, contractual obligations were breached, some companies declared a force majure, supply chains were disrupted, foreign credit lines were lost and servicing offshore obligations became very difficult for most businesses.
“The macroeconomic shocks were also very profound- sharp depreciation in the exchange rate, liquidity challenges in the forex market and high inflationary pressures.”

He noted that the good news is the economy is on a positive trajectory, domestically and globally over improved global oil prices and total ease of businesses.
He added, “But the good news is that we are gradually getting out of the situation. Economic activities are gaining momentum domestically and globally. Commodity prices are also recovering which has positive implications for macroeconomic outlook. But there are still lingering issues around some desirable reforms in the economy.”

Speaking from shareholder’s perspective, the Chairman, Progressive Shareholders Association of Nigeria, Boniface Okezie said the growing trade & other receivables of these companies is a reflection of the bad economy despite growth in Gross Domestic Product (GDP).
According to him: “Cost of products & services are on increase and it is affecting on purchasing power. As a shareholder, I expected customers to pay on trade & receivables because these are funds borrowed from shareholders to run the operations of these companies.
“Companies giving out goods and services to customers are doing it based on trust and once a company fails to payback, it becomes an issue to the company and shareholders return.

“These companies with growing trade & receivables must intensify their recovery mechanism and recover these funds before the close of 2021 financial year. These are funds a customer’ borrowed from a company and must be refunded otherwise, these they (customer) should be blacklisted from transacting businesses.”
Stanbic IBTC Bank Nigeria in its recent Purchasing Manager Index (PMI) report noted that material scarcity and unfavourable exchange rate movements exerted upward pressures on costs, however, leading to a record rate of purchase price inflation.
“Subsequently, this fed through to a steep rise in selling prices, ”the report stated.
The report explained further that central to the improvement was a solid and accelerated rise in new orders, which panelists mostly linked to the securing of new clients.

It added, “Contrary to the improvement in domestic sales, exports fell, and at the quickest rate since December amid persisting international COVID-19restrictions. Nevertheless, to meet demand firms increased their output levels, but the pace of expansion was only modest, and much softer than the rate of new order growth.

“Cash and material shortages reportedly hindered some firms’ ability to raise output. All four of the monitored sub-sectors recorded expansions, with manufacturers seeing the strongest uplift, followed by wholesale & retail, services and agriculture, respectively.
“Higher raw material and commodity costs as well as unfavourable naira-dollar exchange rate movements led to a substantial increase in input expenses. In fact, purchase costs rose at the quickest rate in nearly eight years of data collection. Firms were able to pass on part of the increase to clients however, with charge inflation the second-strongest in the series to date.”