Following the implementation of foreign exchange rules, companies doing business in Nigeria, such as MTN and Dangote, have projected higher losses for the second quarter of the year.
Nine companies have already lost N960.18 billion as a result of the new forex regulation in the second quarter.
The rapid naira depreciation that occurred after the Central Bank of Nigeria attempted to bridge the gap between the official and parallel rates of the naira had a detrimental effect on the firms’ half-year financial results.
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In the first half of 2023, companies like MTN Nigeria Communications Plc, Airtel Africa Plc, Dangote Cement Plc, Dangote Sugar Refinery Plc, Nestle Nigeria Plc, MRS Oil Nigeria Plc, Guinness Nigeria Plc, Nigerian Breweries Plc, and Seplat Energy Plc incurred losses in foreign currency totaling N960.18 billion.
The firms stated that the full impact of the forex reforms would reflect in the second half of the year.
MTN, one of the firms, stated, “These policy reforms are expected to be positive for the economy in the medium to long term. However, in the short term, they have created additional financial burdens on consumers and businesses, and these will be fully reflected in the pressures on our margins in H2.”
It added, “The exchange rate is adjusted based on the reference rate at the end of the preceding quarter for some of the contracts and the average rate in the quarter for others. As a result, the full impact is expected to kick-in in H2.”
Airtel, another firm, said its loss from naira devaluation could grow from $800m to $900m in annualised loss from the $471m it lost as of the quarter ended June 30, 2023.
It said, “In line with the sensitivity analysis published, the impact of the devaluation seen to date is expected to be between$850m and $900m on annualised revenues. The naira devaluation impact reported this quarter amounts to only $45m reflecting the timing of the devaluation.”
The naira has experienced significant volatility after the CBN ordered banks to eliminate the rate cap at the official Investors and Exporters’ Window of the foreign currency market. Since hovering around N450/dollar prior to the forex changes, it had continuously traded above N700/dollar.
According to MTN, so far, the FX reforms have cost them N131.5 billion, and in the first half of 2023, its profit after tax decreased by 29.1% to N128.69 billion.
Following a foreign currency loss of $471 million before taxes, Airtel reported a loss of $151 million. For the six months ended June 30, 2023, Dangote Cement reported a net exchange loss of N113.63 billion on transactions in foreign currency.
Dangote Sugar recorded an exchange loss in the ordinary course of business of N83.09bn. Nestle’s net foreign exchange loss was N123.77bn (in a table). Guinness foreign exchange loss was N49.09bn. Nigerian Breweries Plc had a net loss on foreign exchange transactions of N85.26bn for the year to date (June 30, 2023).
Seplat’s loss on foreign exchange amounted to N17.21bn for the half year and MRS’s net forex loss was N2.43bn, from a net forex gain of N27.76m in the corresponding period of 2022.
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