Dangote, MTN, others lose N1.7tn to naira depreciation

In line with an evaluation of their monetary statements printed on the Nigerian Change Group website, the listed corporations incurred significant losses within the 2023 financial year, mainly due to forex-related losses.

Nigeria’s largest conglomerate, Dangote Industries, mentioned in its 2023 monetary assertion that it incurred a N164bn FX loss in 2023. The conglomerate said the loss was primarily due to its operations in different nations.

Another manufacturing company, BUA, additionally reported a foreign exchange deficit of N69.9bn. This was a major increase from the N5.5bn it recorded in 2022.

The agency mentioned, “The Firm is uncovered to overseas trade danger arising from future industrial transactions and a few recognised belongings and liabilities to the US greenback and euro.

“Administration minimises the impact of the forex publicity by shopping for foreign currency exchange when charges are comparatively low and using them to settle payments when due. The corporate is primarily exposed to the US dollar and Euro.”

In the meantime, Nigerian Breweries, in its audited 2023 monetary report, recorded a lack of N153bn, a pointy distinction to the N26.3bn recorded in 2022. This means the corporation’s loss increased by 83 per cent in 12 months.

The foreign exchange loss significantly affected the agency’s general efficiency within the 2023 monetary year, driving its internet loss to N106bn.

FMCG giant Nestle Nigeria was not spared. In its 2023 financials, the corporation mentioned that because of the naira’s depreciation, it incurred forex-related losses of N195.bn.

The agency mentioned that its profit-after-tax was negatively impacted by the naira’s depreciation, as its working price jumped by 41.2 per cent to N122.7bn.

One other massive participant within the FMCG sector, Cadbury Nigeria, mentioned in its 2023 monetary assertion that it incurred a lack of N36.93bn due to trade price variations in 2023.

The currency-related problem was a severe theme that negatively impacted the corporation’s financials in 2023.

Also Read: Dangote Names Refinery Street After Herbert Wigwe

In response to the unfavourable fairness of N15.08bn recorded in 2023, which was 213 per cent lower than the previous year, Cadbury Nigeria has proposed a strategic transfer to deal with its monetary construction.

The corporation plans to transform its excellent $7.7m mortgage payable to its main shareholder, Cadbury Schweppes Abroad Restricted, into fairness.

MTN Nigeria recorded a staggering foreign exchange loss of N740.4bn in telecommunications. This represented an 804 percent enhancement compared to the N81.8bn recorded in 2022.

Within the banking trade, FBN Holdings took a significant foreign exchange loss valued at greater than N350bn within the  2023 monetary year.

The HoldCo, in its unaudited monetary report, mentioned N253.7bn internet foreign exchange losses had been recorded within the remaining quarter alone.

It blamed the losses on a coverage shift in June 2023 — liberalising the overseas trade market.

Cumulatively, the seven corporations misplaced a complete N1.7tn to the naira depreciation.

In recent months, companies in Nigeria have grappled with the volatility of the trade price, an improvement that has had devastating penalties for corporations with significant foreign exchange publicity.

The scenario was exacerbated after the Central Financial Institution of Nigeria introduced in June 2023 the option of floating the native currency to permit it to find its true worth.

In its ‘Africa Outlook 2024,’ launched in November 2023, the analysis and evaluation division of the Economist Group—Economist Intelligence Unit warned that high inflation and the gap between the naira’s official and parallel market charges would lead to gasoline trade price instability and periodic devaluations.

It mentioned, “Elsewhere, double-digit forex depreciation is anticipated within the leading economies of Egypt, Sudan, Ethiopia, Angola, and Nigeria.

“In Nigeria, unsupportive financial coverage implies that the naira will remain under strain. The central financial institution lacks the firepower to adequately serve the market or clear a backlog of overseas trade orders, which can unnerve overseas buyers.

“Excessive inflation and a continued unfold with the parallel market will destabilise the trade price regime and end in periodic devaluations.”

Consequently, in January 2024, the CBN opted to alter the methodology for calculating the official trade price. This led to an additional devaluation of the naira, as the native forex reached an all-time low of N1,800/$ in February.

Talking with The PUNCH, the Vice Chairman Of Highcap Securities Ltd, David Adonri, mentioned that the suddenness of the trade price floating didn’t give firms much room to brace for the influence the brand-new coverage would have on enterprise profitability.

Adonri additionally warned that extra multinational firms could decide to exit Nigeria if the trade price disaster isn’t resolved definitively.

He mentioned, “The floating of the naira was one thing that occurred immediately. Many of these customers of laborious currencies didn’t combine for the sudden change of occasions. That’s the reason they had been caught napping.

“Otherwise, if they had been given time to regulate, they’d have been capable of evaluating their excellent obligations in laborious currencies or discontinuing the pursuit of recent obligations in laborious currencies until they restructured their techniques to absorb the change.

When asked if additional multinational firms could resolve to affix the likes of Procter & Gamble, GSK, and Sanofi to exit Nigeria, Adonri said, “Yeah. As a result, these firms you talked about are all import-dependent multinational overseas firms manufacturing in Nigeria. All their inputs are sourced from their mum or dad’s firms overseas or outside Nigeria.

“So, the sudden floating of the naira has dealt them an extreme blow on the viability of their companies in Nigeria. That’s the reason they’re leaving.”