Naira Devaluation: MTN, Nestle, Dangote Cement, Others Suffer N2.06trn FX Losses
CHIGOZIE AMADI
Amid dwindling Naira value at the foreign exchange market, MTN Nigeria Communication Plc and six other Nigeria’s leading manufacturing companies incurred a combined foreign exchange loss of N2.06 trillion in the 2024 financial year, about 28.9 per cent increase over N1.6 trillion recorded in 2023.
Others are: Nestle Nigeria Plc, Dangote Cement Plc, Lafarge Africa Plc, BUA Cement Plc and Nigerian Breweries Plc and Dangote Sugar Refinery Plc.
This is according to information contained in the financial statements of these companies, collated and analysed by THISDAY.
The size and magnitude of the foreign exchange loss were so significant that it almost wiped out the shareholders’ funds of the firms, forcing mega restructuring for others. It also led to earnings loss that denied dividend to shareholders for the second consecutive year.
The foreign exchange losses by these companies in the 2024 financial year was triggered by the devaluation of the naira following President Bola Tinubu administration’s forex unification policy launched in June 2023.
Following a series of devaluation policy of the Central Bank of Nigeria (CBN) the naira closed the year at an official exchange rate of N1,535 against the dollar compared to N907.1 against the dollar at the end of 2023, as businesses and consumers continued to grapple with escalating costs.
This led to massive foreign currency losses incurred by most Nigerian businesses with dollar denominated obligations when translated in local currency.
From the 2024 financial year results, Nestle Nigeria, Nigerian Breweries and MTN Nigeria Communication were most badly affected by the foreign exchange losses.
MTN Nigeria topped the list with a combined foreign exchange loss of about N1.03 trillion, representing 23.7per cent increase over N834.28billion in 2023. With over N1.03 trillion foreign exchange loss in 2024, MTN Nigeria posted N550.33 billion loss in 2024 from N177.89 billion loss declared in 2023.
According to the telecommunication giant, the improved liquidity in the foreign exchange market has enabled it to reduce its outstanding LC US$ obligations by 95 per cent to approximately $20.8 million, tapering the impact of future naira depreciation and the associated finance costs.
“The reduction accounted for approximately 86 per cent of the realised net forex losses of N561.9 billion recorded in the period, while the unrealised portion amounted to N363.4 billion,” the company added.
The CEO, MTN Nigeria, Mr. Karl Toriola in statement stated that, “In the foreign exchange market, the naira depreciated to N1,535/$ by the end of 2024 (from N907.1/$ on 31 December 2023), as businesses and consumers continued to grapple with escalating costs.
“However, we took some comfort from the improvement in US dollar liquidity in the foreign exchange market and reduced volatility over the course of the year, as the naira exchange rate held relatively stable through H2 2024.”
He noted that these headwinds significantly impacted MTN Nigeria’s costs, particularly those related to tower leases and other foreign currency obligations.
“Notwithstanding, through our focus on commercial execution and operational efficiencies, MTN Nigeria delivered a robust topline performance and an encouraging H2 improvement in the bottom line,” he added.
Dangote Cement and Sugar divisions incurred a combined N458.23 billion in 2024, about 36.26 per cent increase over N336.27billion in 2023.
While Dangote Cement declared N249.3billion foreign exchange loss in 2024, up by 52 per cent from N164.08billin in 2023, Dangote Sugar refinery posted N208.2billion foreign exchange loss in 2024, a growth oof 21.3 per cent from N172.2billion declared in 2023.
Nestle Nigeria and Nigerian Breweries also join the list of heavily impacted companies, with N290.7 billion and N157.59billion foreign exchange losses in 2024, respectively.
The declared foreign exchange losses led to Nestle Nigeria announced N221.6 billion loss before tax in 2024 from N104.03billion loss before tax in 2023, while Nigerian Breweries posted N182.92 billion loss before tax in 2024 from N145.22 billion in 2023.
The CEO/Managing Director, Nestlé Nigeria, Mr. Wassim Elhusseini stated that net profit and equity were impacted by high finance costs associated with the revaluation of the company’s foreign currency obligations, due to an unprecedented devaluation of the Naira.
Commenting on these companies 2024 foreign exchange losses, the Vice President Highcap Securities Limited, Mr. David Adnori stated the companies with significant foreign currency debt exposure face heightened risks when the naira depreciates.
“With the naira’s depreciation, the cost of servicing foreign currency debt escalates, consuming a larger portion of their revenue,” he said.
This increase in debt servicing costs can lead to tighter financial conditions and reduced profitability, potentially increasing default risks. Such financial instability can affect the banking sector and overall financial stability.
He noted the impact of currency instability on investment adding, “uncertainty regarding the financial health of major companies and currency stability might deter investment, causing both domestic and foreign investors to adopt a ‘wait and see’ approach.
“This hesitation can delay or reduce the capital inflows that are essential for economic growth. Moreover, companies burdened by foreign exchange losses might freeze hiring or reduce their workforce to cut costs, which could adversely affect employment levels.”
Analysts said Nigerian businesses have faced considerable challenges due to substantial foreign exchange losses, mainly due to the depreciation of the naira against major currencies.
“This foreign exchange challenge has resulted in a series of net losses for numerous enterprises, undermining shareholders’ equity in some instances,” sais Chief Operating Officer of InvestData Consulting Limited, Mr. Ambrose Omordion noted that
He also highlighted the broader impact on shareholders, who have traditionally relied on dividend payouts from these businesses.
“The inability to offset losses has hindered dividend distributions, impacting shareholders’ returns and expectations,” he said.
