In 2023, four of Nigeria’s most valuable companies—Dangote Group, Nestle Nigeria, and MTN Nigeria—lost N1.7 trillion due to the naira’s depreciation. Based on an examination of their financial statements available on the Nigerian Exchange Group website, the listed companies suffered enormous losses in the 2023 fiscal year, primarily from foreign exchange losses.
The biggest company in Nigeria, Dangote Industries, reported N164 billion in foreign exchange losses in its 2023 financial report. The company said that its foreign businesses were the main cause of the loss. BUA, a massive manufacturing company, also disclosed an N69.9 billion forex loss. Compared to the N5.5 billion it reported in 2022, this indicated a considerable growth.
The firm said, “The Company is exposed to foreign exchange risk arising from future commercial transactions and some recognised assets and liabilities to the US dollar and euro.
“Management minimises the effect of the currency exposure by buying foreign currencies when rates are relatively low and using them to settle bills when due. The company is primarily exposed to the US dollar and Euro.”
Nigerian Breweries, on the other hand, reported a loss of N153 billion in its audited 2023 financial report—a stark contrast to the N26.3 billion reported in 2022. This indicates that in a year, the company’s loss rose by 83%.
The company’s overall performance in the 2023 fiscal year was significantly impacted by the FX loss, which resulted in a N106 billion net loss. Big FMCG company Nestle Nigeria was likewise not exempt. The company stated in its 2023 financials that it suffered N195.bn in forex-related losses as a result of the naira’s depreciation.
The company said that the depreciation of the naira had a negative effect on its profit-after-tax, as its operational costs increased by 41.2% to N122.7 billion.
A significant participant in the FMCG industry, Cadbury Nigeria, in its 2023 financial statement said it incurred a loss of N36.93bn due to exchange rate differences in 2023.
The currency-related challenge was a major theme that negatively impacted the company’s financials in 2023.
In response to the negative equity of N15.08bn recorded in 2023, reflecting a 213 per cent decrease from the previous year, Cadbury Nigeria has proposed a strategic move to address its financial structure. The company plans to convert its outstanding $7.7m loan payable to its major shareholder, Cadbury Schweppes Overseas Limited, into equity.
In the telecommunications sector, MTN Nigeria recorded a staggering forex loss amounting to N740.4bn. This represented an 804 per cent increase compared to the N81.8bn recorded in 2022.
In the banking industry, FBN Holdings took a significant forex loss valued at more than N350bn in the 2023 financial year.
The HoldCo, in its unaudited financial report, said N253.7bn net forex losses were recorded in the final quarter alone. It blamed the losses on a policy shift implemented in June 2023 — the liberalisation of the foreign exchange market.
Cumulatively, the seven firms lost a total of N1.7tn to the depreciation of the naira. In recent months, businesses in Nigeria have grappled with the volatility of the exchange rate, a development that has had devastating consequences for firms with significant forex exposure.
The situation became exacerbated after the Central Bank of Nigeria announced in June 2023 that it would float the local currency to allow it to find its true value.
In its ‘Africa Outlook 2024,’ released in November 2023, the research and analysis division of the Economist Group — Economist Intelligence Unit warned that high inflation and the gap between the official and parallel market rates of the naira will continue to fuel exchange rate instability and result in periodic devaluations.
It said, “Elsewhere, double-digit currency depreciation is anticipated in the major economies of Egypt, Sudan, Ethiopia, Angola, and Nigeria.
“In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved.
“High inflation and a continued spread with the parallel market will leave the exchange rate regime unstable and result in periodic devaluations.”
Consequently, in January 2024, the CBN opted to change the methodology for the calculation of the official exchange rate. This led to a further devaluation of the naira, as the local currency reached an all-time low of N1,800/$ in February.
