Major companies quoted on the Nigerian stock exchange have reported a cumulative N716.8 billion in FX losses as a result of the devaluation of the Nigerian naira from N461.10/$1 in December 2022 to N756.08/$1 in June 2023.
According to data from their half-year reports, 13 major Nigerian firms have under heavy headwinds of heightened FX costs and inflationary pressures due to the disruptions in the macroeconomic space.
A foreign exchange gain/loss occurs when a company buys and/or sells goods and services, or has outstanding loans, cash and other exposure in a foreign currency and that currency fluctuates relative to their home currency.
The surge in foreign exchange (FX) losses led to profit reduction and outright losses on the bottom line for most of the firms.
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Eight of the thirteen firms reported a cumulative -N292 billion in loss after tax in the 6-month period to June 2023.
The telecommunications firms booked some of the biggest charges, with Airtel Africa top of the list with N245.67 billion ($317 million) of foreign exchange losses, and MTN Nigeria booking N131.45 billion in FX losses in the 6-month period to June 2023.
Consumer goods firms were also impacted with Nestle Nigeria booking N126.76 billion in FX losses, Nigerian Breweries N85.26 billion, Guinness Nigeria with N45.95 billion, Cadbury N21.31 billion, Unilever Nigeria N17.29 billion and Vitafoam N97 million.
Others include: Seplat N17.2 billion, Notore Chemical N14.04 billion, Eterna Plc N9.8 billion, John Holt N1.29 billion and Okomu Oil N695 million.
The largest telecommunication firm in Nigeria saw net foreign exchange loss jump by 865%, pushing MTN Nigeria profit for the period down 29% to N128.5 billion from N181.9 billion in June 2022. Earnings Per Share fell to N6.33 from N8.95.
For investors, the stock could be under pressure over the next 6-months as the full impact net foreign exchange loss is expected to kick-in in the second half (H2) of 2023, according to Karl Olutokun Toriola, Chief Executive Officer of MTN Nigeria.
Airtel Africa expects the change to the FX market in Nigeria which resulted in a significant naira devaluation, to improve liquidity over time, thereby alleviating the challenges faced by international businesses associated with accessing US dollars and thus hindering accelerated growth.
For Cadbury Nigeria Plc., the currency devaluation and resultant FX losses pushed its total equity into negative territory for the June 2023 period.
The total equity of a company, also known as the shareholders’ equity, is the difference between the company’s assets and its liabilities.
The company’s total liabilities of N76.19 billion as at June 2023 exceeded total assets of N74.65 billion as at June 2022, resulting in a negative shareholders’ equity of N1.42 billion.
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