In a challenging economic climate, prominent Nigerian firms, including Dangote Group, Nestle Nigeria, and MTN Nigeria, among others, faced substantial losses amounting to N1.7 trillion due to the depreciation of the naira in 2023.
A detailed analysis of their financial statements, accessible on the Nigerian Exchange Group’s website, underscores the significant impact of forex-related losses on these listed companies’ performances during the fiscal year.
Dangote Industries, Nigeria’s largest conglomerate, reported an FX loss of N164 billion, primarily attributed to its operations in other countries. Similarly, BUA, a major manufacturing giant, witnessed a significant surge in forex losses, reaching N69.9 billion compared to N5.5 billion in 2022.
FMCG giants like Nigerian Breweries and Nestle Nigeria were also heavily affected. Nigerian breweries recorded a staggering loss of N153 billion, marking an 83 percent increase from the previous year. Nestle Nigeria reported forex-related losses amounting to N195.5 billion, leading to a 41.2 percent rise in operating costs to N122.7 billion.
Even companies like Cadbury Nigeria were not immune, incurring a loss of N36.93 billion due to exchange rate differences in 2023. To address its financial challenges, Cadbury Nigeria proposed a strategic move to convert outstanding loans into equity.
The telecommunications sector also faced substantial losses, with MTN Nigeria recording a forex loss of N740.4 billion, marking an 804 percent increase from 2022. Similarly, FBN Holdings, a key player in the banking industry, reported significant forex losses exceeding N350 billion, with N253.7 billion recorded in the final quarter alone, attributed to a policy shift in the foreign exchange market.
The cumulative impact of these losses amounted to N1.7 trillion, highlighting the severity of the situation. The volatility of the exchange rate, exacerbated by the Central Bank of Nigeria’s decision to float the local currency in June 2023, further worsened the plight of businesses.
The Economist Intelligence Unit’s ‘Africa Outlook 2024′ warned of continued instability in Nigeria’s exchange rate due to high inflation and disparities between official and parallel market rates. In January 2024, the CBN’s change in the methodology for calculating the official exchange rate led to further devaluation, with the naira hitting an all-time low of N1,800/$ in February.
Industry experts, including David Adonri, Vice Chairman of Highcap Securities Ltd, expressed concerns over the sudden impact of the floating exchange rate on businesses’ profitability. Adonri cautioned that if the exchange rate crisis persists, more multinational companies may consider exiting Nigeria, following in the footsteps of Procter & Gamble, GSK, and Sanofi.
