Nigerian Naira’s Revaluation Causes N918 Billion Loss To 8 Companies

Eight companies suffered a loss of N918.1 billion after the value of Nigeria's currency, Naira, continuously fell against the U.S. dollar.

Dangote Sugar Refinery, Dangote Cement, Nestle Nigeria, Nigerian Breweries, Guinness Nigeriac, MTN Nigeria Communications, Airtel Africa, MRS Oil Nigeria and Seplat Energy were affected by the currency revaluation.

The Central Bank of Nigeria (CBN) in June allowed the market to determine the local currency's value, which caused Naira to fall from N461 per $1 in December 2022 to N777 in September.

One of the affected companies, Dangote Sugar, noted that it lost N90.99 billion due to revaluation.

"In line with the CBN circular of 14 June 2023 (Operational Changes to the Foreign Exchange markets) which introduced the 'willing buyer willing seller' on the Investors and Exporters (I&E) Window based on the prevailing market rates, the group changed its USD/Naira closing rate of 461 as at 31 December 2022 to 756 as at 30 June 2023 and now 776.79 as at 30 September 2023," the company said, Punch reported.

"Monetary assets and liabilities for the Nigeria operations were revalued at this rate resulting in a revaluation loss of N72.88bn for the Group. This was driven by Letters of Credit and foreign vendor balances," it added.

The company noted that the "revaluation loss is included as part of N90.997 billion for the group (N90.42bn for the company) in note 10.0 above. The loss has been fully recognized in the month of September 2023."

Dangote Cement recorded an N99.02 billion loss, while Nestle recorded a loss of N143.4 billion. MRS Oil lost N2.37 billion and Seplat lost N16.38 billion. Nigerian Breweries recorded a revaluation loss of N86.83 billion, while MTN Nigeria Communications suffered an N232.8 billion forex loss.

Aside from recording forex loss, MTN Nigeria Communications also faces issues regarding foreign exchange for its capital expenditure requirements.

"Given the protracted forex paucity in the market, MTN Nigeria utilized trade lines to fund the establishment of confirmed irrevocable letters of credit for its network capex investments to sustain revenue growth," it explained. "Our recognized forex loss for the nine months to September 2023 was 77 percent higher than the amount reported in H1 2023, where we measured all the trade lines after offsetting the naira-denominated cash cover that was provided to the banks."

Naira is one of the worst-performing currencies in Africa, according to the World Bank. In July, the International Monetary Fund (IMF) revealed a 10% increase in USD value would have a huge impact on emerging market economies like Nigeria by decreasing their output by 1.9%.