NSE 30 capex up 16 percent to N113bn in Q1

Nigeria’s largest companies expended more on the acquisition of plants, property and equipment in the first quarter of 2019.

The combined capital expenditure (capex) of NSE-30, the most liquid and capitalized stocks on the Nigerian Stock Exchange, grew 16 percent to N113 billion in the review quarter.

Almost half of NSE-30 players elevated their spending on capital projects, with industrial goods player raising capex the most.

Capital expenditure refers to the spending on the acquisition of new assets including the purchase of machineries, office furniture, and the fund spent on maintaining or replacing the same.

A growing Capex is indicative of an expanding economy as the simple assumption is

that businesses have room to expand activities in times of boom. By the same token, they contract when the business environment is harsh.

Capex however varies with industries as financial services firms would not likely spend as much on infrastructure as consumer goods and industrial goods firms.

Analysts explained that companies committing their financial resources in fixed capital portray optimism about improvement in the broader economy and increased patronage for their products.

The fact that the Nigerian economy slowed 2.01 percent in first quarter, and growth in capex upped 16 percent, indicates that the pickup in economic activities in the review quarter was below the expectations of companies.

For Q1 2019, Dangote Cement accounted for 30 percent of total spending with N34.1 billion, after skyrocketing capex by 580 percent to N34billion.

Oil firms, Oando and Mobil increased capital spending by 200 percent and 461 percent respectively to N6 billion and N2 billion. Meanwhile, Total and Forte Oil reduced theirs by 57 percent and 55 percent respectively.

Majority of consumer goods players reduced expenditure on capital projects due to the fact that consumers’ wallet which has been stifled since the 2016 recession, prompted them to remain cautious about spending big.

Consumer goods firms are struggling to grow top-line as well as bottom-line as they are bedevilled with decrepit infrastructure, tough operating conditions and high cost of credit, which has left little reason for expanding operations.

Dangote sugar, Dangote flour and Nestle cut capex by 51 percent, 52 percent and 76 percent respectively.