The devaluation of the Naira in June 2023 has had a significant impact on foreign-owned subsidiaries operating in Nigeria, with estimated foreign exchange losses surpassing N900 billion for the nine-month period ending September 2023.
Companies with controlling shareholders abroad, such as Airtel Africa, MTN Nigeria, Unilever Nigeria, International Breweries, Nigerian Breweries, Cadbury Nigeria, Lafarge Africa, AXA Mansard, Stanbic IBTC Holdings, Guinness Nigeria, TotalEnergies Marketing, Nestle Nigeria, PZ Cussons Nigeria, and Beta Glass, among others, have been affected.
Airtel Africa emerged as the company with the highest losses during the period. In the first half of 2024, Airtel accrued a foreign exchange loss of $471 million, equivalent to N404 billion at an exchange rate of N858/$. This loss contributed to the company’s after-tax loss of $13 million during H1 2024.
MTN Nigeria, another major player, experienced a remarkable foreign exchange loss during the nine months ending 2023. The subsidiary of MTN Group incurred N232.8 billion in FX losses, marking a 735% year-on-year growth from the same period in 2022.
Several other foreign-managed companies on the Nigerian Exchange (NGX) faced unrealized FX losses due to the currency devaluation. Notable mentions include Nestle Nigeria, Nigerian Breweries, Cadbury Nigeria Plc, International Breweries Plc, TotalEnergies Marketing Nigeria Plc, Unilever Nigeria Plc, Guinness Nigeria Plc, GSK Consumer Nigeria Plc, and Lafarge Africa Plc.
Companies with foreign parent groups often face challenges with trade payables denominated in foreign currencies, importing a significant portion of their inventories. The Naira devaluation resulted in unrealized FX losses for most of these companies.
Factors contributing to these losses include the revaluation of foreign-denominated trade loans, finance expenses from foreign exchange borrowings, and the abrupt and substantial drop in the value of the Naira on June 14, 2023.
While some companies, like Stanbic IBTC Holdings, protect themselves from FX fluctuations through hedging with FX futures, the recent volatility and consistent decline of the Naira remain sources of concern for these companies.
In the official market, the Naira’s exchange rate has fluctuated between N750/$ and N900/$ over the past two weeks, while in the parallel market, it has consistently hovered around the N1100/$ mark. The ongoing Naira instability poses potential risks for additional FX losses among these companies.
