The dollar debts of 15 listed Nigerian companies have surged to approximately N3.76 trillion as of December 2023, according to The PUNCH’s analysis of their annual reports filed with the Nigerian Exchange Limited. This marks a 109.74% increase from the N1.79 trillion recorded in 2022, driven by the depreciation of the naira.
In dollar terms, these companies’ total debts, including trade payables, Letters of Credit, and dollar-denominated loans, rose by 6.59% to $4.15 billion from $3.89 billion in the previous year. The companies span various sectors, including telecoms, manufacturing, and oil & gas, with prominent names like Dangote Cement, BUA Cement, Lafarge, Dangote Sugar, and MTN Nigeria among them.
On June 14, 2023, the Central Bank of Nigeria (CBN) announced the harmonization of the foreign exchange market segments into the National Foreign Exchange Market on the FMDQ. Since then, the naira has weakened significantly, closing 2023 at 911/$, down from 471/$ in mid-June.
According to Fitch Ratings, the naira experienced about a 40% devaluation by February 2024. As of Friday, the naira stood at 1,485.99/$ at the FMDQ window, meaning firms would need around N6.16 trillion to settle their dollar-denominated debts.
Several companies, like Dangote Cement and BUA Cement, reported significant increases in their dollar loans. Dangote Cement’s dollar loans rose to N362.32 billion in 2023 from N257.04 billion in 2022. Similarly, BUA Cement’s dollar exposure increased to N320.27 billion from N34.99 billion.
Other companies, including Unilever, Nestle, and International Breweries, also reported substantial dollar debts. Unilever’s dollar-denominated debts dropped to N3.71 billion from N9.92 billion, while Nestle’s debts increased to N410.44 billion.
The significant depreciation of the naira has posed considerable challenges for businesses. Aliko Dangote, President of Dangote Industries Limited, highlighted the impact of the naira’s depreciation on business operations, particularly in the food and beverage sector.
In the manufacturing sector, companies like Cadbury and NASCON Allied Industries faced similar challenges. Cadbury’s dollar debt, owed to its principal shareholder, Cadbury Schweppes Overseas Limited, stood at N7.03 billion, which was converted to equity.
The oil and gas and telecom sectors also reported rising dollar debts. Seplat Energy’s debts rose to N759.25 billion from N527.69 billion, while MTN Nigeria reported N624 billion in dollar loans.
The forex backlog issue has exacerbated the problem. Despite the CBN’s claims of clearing all valid forex backlogs, manufacturers reported significant losses due to delays in forex settlements. The Manufacturers Association of Nigeria (MAN) stated that its members lost at least N1.5 trillion in the past six months due to the CBN’s delay in settling forex backlogs.
Experts have expressed concern over the increased exposure of firms to currency risks and the lack of adequate hedging instruments. David Adonri, Vice Chairman of Highcap Securities Ltd, described the situation as a disaster for Nigeria’s financial economy, highlighting the need for honest and effective management of the forex crisis.
Tajudeen Ibrahim, Director of Research and Strategy at Chapel Hill Denham, emphasized the impact of the naira’s depreciation on companies’ profitability, noting the limited availability of hedging instruments to mitigate foreign currency risks.
The increasing dollar obligations for major firms and the ongoing forex backlog challenge underscore the need for robust policy measures to stabilize the exchange rate and support the Nigerian economy.
