Forex-related Losses Plague Top Companies Amid Exchange Rate Volatility
In a tumultuous year marked by currency fluctuations, Nigeria’s corporate giants faced staggering losses totaling N1.7 trillion due to the depreciation of the naira in 2023. A dive into their financial statements reveals the extent of their challenges, with forex-related losses taking center stage.
Dangote Industries, Nigeria’s largest conglomerate, reported a hefty FX loss of N164 billion in 2023, attributed primarily to operations abroad. Similarly, manufacturing titan BUA witnessed a significant spike in forex losses, recording N69.9 billion compared to N5.5 billion in the previous year.
The impact reverberated across sectors, with Nigerian Breweries posting a sharp increase in losses, soaring from N26.3 billion in 2022 to a staggering N153 billion in 2023. The FMCG sector heavyweight Nestle Nigeria also felt the pinch, tallying forex-related losses of N195.5 billion, driving operating costs up by 41.2%.
Cadbury Nigeria faced its share of challenges, reporting a loss of N36.93 billion due to exchange rate differences, prompting strategic restructuring efforts to address its financial structure.
Telecom giant MTN Nigeria encountered a staggering forex loss of N740.4 billion, an 804% surge from the previous year. The banking sector also felt the strain, with FBN Holdings grappling with a forex loss exceeding N350 billion in the 2023 financial year.
These losses, attributed in part to the liberalization of the forex market, underscore the vulnerability of businesses to exchange rate volatility. The sudden policy shift left many companies scrambling to adapt, with little time to mitigate the impact on profitability.
David Adonri, Vice Chairman of Highcap Securities Ltd, highlighted the challenges posed by the abrupt exchange rate floating, warning of potential exits by multinational companies if the crisis persists. Import-dependent firms, already reeling from the impact of the policy change, face mounting pressure on their viability in Nigeria’s market.
As the exchange rate instability persists, businesses brace for further uncertainties, grappling with the repercussions of a depreciating naira. The need for definitive solutions to address the forex crisis looms large, with the fate of Nigeria’s economic landscape hanging in the balance.