October 20, 2018

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Sabi-Business Dec 21, 2015 – Olatunde Gboyega

Sabi-Business Dec 21, 2015 – Olatunde Gboyega

RETURN OF THE MACK Dangote Industries Limited (DIL) buys back Tiger Brands Consumer Goods (TBCG)  (formerly known as Dangote Flour Mills)

There is a old Yoruba saying “E bi taba ti so odaro si… aki nso e kale mo… Literal transalation – Once you’ve said goodbye I’m leaving… it’s difficult to say… Hello I’m back again… (Now if only Jose Mourinho had realized this with Chelsea…)

Dangote Industries Limited (DIL) has bought back 65.7% of Dangote Flour (Tiger Brands Consumer Goods (TBCG) for N10billion in cash from Tiger Brands. Tiger Brands will also write off all loans granted to TBCG and assume and settle all outstanding debt (about N5.6billion).

Now let’s do a few calculations to determine cash received by Tiger Brands

Net Cash received = Cash received by Tiger BrandsOutstanding Debt = (N10 – 5.6)billion = N4.4Billion

Now N4.4 billion is a lot of money… but wait a minute; didn’t DIL sell the same shareholding to TBCG to Tiger Brands in July 2012 for N30.093Billion?

This means Tiger Brands effectively lost N25.693billion (i.e. N4.4 – 30.093) on this transaction.

Thankfully they’ll b fine. Tiger Brands also owns Deli Foods and UACN foods which are doing well by the way.

An analysis of this transaction was previously done by the author in the link here

If November salaries of Federal, State and Council workers remain unpaid? December nko?

The CBN in September published a bailout list of 19 states that accessed a total of N348.40 billion to pay the backlog of salary arrears. This means states will actually have to go-a-borrowing again to meet this backlog.

Based on an analysis of monthly IGR (internally generated revenue) and monthly recurrent expenditures (salaries etc.) 18 states would not generate enough to cover their expenditures (revenue shortfalls) if FAAC allocations dwindle.

Given what oil prices are… and dwindling revenues from the FG….it doesn’t look pretty,

But on the flip side, states should remember that Lagos went through the little or no FAAC allocation quagmire in 2003 and grew monthly revenues from N2billion monthly to N23billion currently…

Remember … All it takes is a little ingenuity… which can be relatively easy to come by when you’re cash-strapped.

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Withdrawal of fuel subsidy begins in 2016  

After much weeping and gnashing of teeth, petroleum subsidy is to go in 2016… it’s a pity this reality is dawning on us four years after it was first proposed (remember Occupy Nigeria in January 2012). This statement was met with relative nonchalance by most Nigerians – “maybe it’s the change we want”?

Imagine the amount of money we could have saved cumulatively as a nation on subsidy payments (estimates):

2012 – N690 billion

2013 – N832 billion

2014 – N600 billion

2015 – N737 billion

Total =N2,859 billion (2.859 trillion Naira or almost half of the proposed 2016 budget)

… guess it’s better late than never.

Inflation up 9.4% in November 2015

Inflation is up by 9.4% compared to November 2014 – it was 9.3% in October 2015 – a 0.1% increase on the month. As much as we try to manage inflation and the figures based on the price increases of a basket of Nigerian commodities (and yes… Garri, shaki and Ponmo are included in this list).

My projection is it’ll hit 10% before March ending 2016 based on two major factors:

  1. Removal of subsidy – as road transportation happens to be the major means by which goods are transported in Nigeria. What do you think will happen if the pump price of petrol goes up to let’s say N97/litre. Our railways are still a work-in-progress…

Remember we as Nigerians like simple mathematics… if petrol increases by N10/litre…  transport fare goes up by 50-100% and… NO… BRT (BUS Rapid Transport) cannot help in carrying goods from KANO…

… Now if only someone would invent a means to bluetooth Garri from Ijebu to Lagos?

Exchange Rate – As the dollar continues to vex at Nigeria and march towards N300/$ – at some point manufacturers will have to raise their price of goods since a lot inputs are dollar denominated. 

 

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