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Naira devaluation: CFOs move to minimise FX losses

Chief Financial Officers (CFOs) of companies in Nigeria have expressed regret over the huge losses incurred as a result of naira depreciation, saying companies must…

Chief Financial Officers (CFOs) of companies in Nigeria have expressed regret over the huge losses incurred as a result of naira depreciation, saying companies must explore alternative revenue sources to minimise the losses.

The CFOs said in the face of the challenging business environment, they have a role to play in steering businesses to growth.

These were some of the submissions during the Lagos Business School Chief Financial Officer Conference held in Lagos on Wednesday.

The Group Chief Operating Officer at Waltersmith Group, Alex Osho, who spoke during a panel session said while firms usually have a number of tools to hedge against currency depreciation, applying them becomes difficult due to the complexity of Nigeria’s economy.

Daily Trust reports that many publicly quoted companies lost hundreds of millions due to naira depreciation.

However, Osho said, “Even though the tools are there, there is no liquidity. All the companies that declared huge (forex) losses. It is not as if the CFOs didn’t know what to do or have a way around it. It is just that they were helpless to a large extent.

“We have hedging instruments in Nigeria, but the issue with it is the depth and liquidity of that market while you can easily adopt this tools in the US and Europe to counter some of the risk you face in the FX environment there are limitations to use those tools in Nigeria because there is no liquidity or convertibility to do so,” he said.

The Chief Executive Officer of Flour Mills of Nigeria Plc, Boye Olusanya noted that companies must explore alternative business models such as import substitution to minimise forex-related shocks.

He said, “The biggest thing is sitting and looking at ways to manage your business by looking for divergent inflows that are non-FX driven.

“The biggest way to solve FX risk as a company is looking for ways to manage your business by divergence into non-FX driven input or output materials. So it’s either you’re exporting or your input materials are local substitutions and those are hedges you will continue to see.”

CEO of Stanbic IBTC Bank, Wole Adeniyi, represented by the bank’s Executive Director, Personal and Private Banking Nigeria, Olu Delano advised firms to find ways to adapt to the currency devaluation and “Keep moving forward.”

Dean of the Lagos Business School, Prof. Chris Ogbechie stated that in today’s rapidly evolving landscape, the role of a CFO has never been more pivotal, especially because businesses were grappling with inconsistent government policy and a vast array of challenges in the macroeconomic environment.

“In today’s rapidly evolving business landscape, the role of the chief finance officer has never been more pivotal. CFOs are stewards of financial health and custodians of strategic decision-making.

“Thus, they are tasked with navigating complexities, driving innovation, and ensuring sustainable growth for their organisations.

 

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