Airtel grapples with currency devaluations in Nigeria, Malawi, posts $549m FX loss

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Indian telecom giant Airtel has been hit hard by currency devaluations in two of its key African markets, Nigeria and Malawi. The company reported a significant foreign exchange (FX) loss of $549 million in its latest financial results.

The telco said in its report released on Thursday that the loss was triggered by the devaluations of the Nigerian naira in June 2024 and the Malawian kwacha in November 2023.

The company, which operates in 14 African countries, reported that the foreign exchange losses had severely impacted its quarterly earnings.

“Loss after tax was $89m, primarily impacted by significant foreign exchange headwinds, resulting in a $549m exceptional loss net of tax following the Nigerian naira devaluation in June 2023 and the Malawian kwacha devaluation in November 2023,” the report stated.

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Nigerian constant currency revenue reached 34.2 per cent growth in Q4’23 despite challenging conditions. However, reported currency revenues saw a decline of 5.3 per cent to $4,979m, primarily due to the impact of currency devaluation, particularly in Nigeria.

The Chief Executive Officer of Airtel Africa, Olusegun Ogunsanya, stated, “Facilitating this growth has been and will remain fundamental to our performance. The investment in our distribution to catalyse growth and the technology required to support this growth have been key.

“Furthermore, our rigorous approach to de-risking our balance sheet and our capital allocation priorities has materially reduced the risks that the currency devaluation has had on our business,” part of his comments on the report stated.

This substantial loss is attributed to the weakening of the Nigerian Naira and the Malawian Kwacha against the US Dollar. These devaluations erode the value of Airtel’s earnings in those countries when converted back to its reporting currency.

Impact on Airtel’s Business:

The financial implications of this FX loss can be multi-pronged:

• Reduced Profit Margins: The $549 million loss eats into Airtel’s overall profitability, potentially impacting its ability to invest in network upgrades and expansion plans.
• Slower Growth: Devalued currencies can make it more expensive for Airtel to import equipment and services, hindering growth initiatives.
• Investor Confidence: Large FX losses can raise concerns among investors about the company’s ability to navigate currency fluctuations in Africa.

Looking at the Bigger Picture:

Airtel’s situation reflects a broader challenge faced by many multinational corporations operating in Africa. Currency volatility remains a significant risk, particularly for companies with revenue streams denominated in local currencies but expenses in stronger currencies like the US Dollar.

Questions for Airtel and Regulators:

• Airtel’s Strategy: How will Airtel hedge against future currency fluctuations to mitigate FX losses?
• Government Action: Will Nigerian and Malawian authorities take steps to stabilize their currencies and create a more predictable business environment?

The Path Forward:

Airtel will need to develop a robust strategy to manage currency risks. This could involve implementing financial instruments like currency forwards or options to lock in exchange rates. Additionally, focusing on local sourcing and cost optimization can help reduce reliance on foreign currency.

For regulators in Nigeria and Malawi, fostering economic policies that promote currency stability would be beneficial not just for Airtel but for all foreign investors operating in their countries.

It remains to be seen how Airtel navigates these currency headwinds and whether it can develop a sustainable business model in the face of a volatile African forex market.