Several companies reported foreign exchange gains in Q2 earnings due to the naira’s devaluation. Data revealed that Lafarge Cement, AXA Mansard, Fidelity Bank, and UAC of Nigeria recorded FX gains in H1 2023.
Lafarge Cement experienced an N2.2 billion FX gain in H1 2023, despite a decrease in profit after tax and an increase in finance income.
Axa Mansard, an insurance company, experienced an N11.1 billion FX gain in H1 2023 due to investments in FX, compared to an N0.578 billion loss in 2022. The firm reported a profit after tax of N13.1 billion.
Fidelity Bank experienced a net foreign exchange gain of N33.19 billion in H1 2023, up from N2.5 billion in 2022. The bank’s profit after tax increased to N53.2 billion from N22.8 billion.
UAC of Nigeria reported a N3.6 billion FX gain in H1 2023, compared to a N337 million loss in the previous year.
Financial expert Muda Yusuf explains that a company’s exposure to foreign currency impacts its ability to benefit or lose from currency fluctuations. Companies with naira-denominated assets benefit from the recent currency devaluation as their assets’ value increases in dollar terms. Conversely, companies with naira-denominated liabilities face penalties due to their increased value in dollar terms.
CardinalStone analyst Ngozi Odum suggests banks can book FX income through investments in instruments, trading, and revaluation, but other methods are also available.
