The liberalisation of the foreign exchange regime in Nigeria which led to large devaluation of the naira has had positive and negative impacts on the financial performance of companies in 2023.
The biggest blow was felt by companies that have dollar-denominated loans in their capital structure, while those that have significant dollar reserves saw a boost in their earnings.
Banks top the list of companies that benefitted from the naira devaluation, with some of them recording huge foreign exchange revaluation gains that drove up their profits.
However, some companies, especially fast-moving consumer goods (FMCG) businesses, which rely heavily on imported goods and services to support their production processes, have been badly affected.
“Various firms that rely on imported raw materials had more exposure to foreign exchange, leading to a spike in foreign exchange loss,” Mustapha Umaru, an equity research analyst at CSL Stockbrokers Limited, said.
The Central Bank of Nigeria in June merged all segments of the FX market into the Investors and Exporters window, and reintroduced the willing buyer, willing seller model.
The naira has continued to depreciate against the dollar and other major foreign currencies since then.
The official exchange rate fell from N463.38/$ to N889.86/$ as of December 15. At the parallel market, the naira depreciated to 1,186/$ from 762/$.
Tajudeen Ibrahim, director of research and strategy of ChapelHill Denham, said the banks with foreign exchange gains most likely had net foreign currency assets while the banks with FX losses had net foreign currency liabilities more than foreign currency assets, resulting in devaluation loss.
High inflationary pressures have shrunk business activity four times so far this year.
Data from the latest monthly Purchasing Managers’ Index (PMI) by Stanbic IBTC Bank show that the headline index dropped to the lowest in eight months of 48.0 in November 2023 from 49.1 in the previous month, marking the second straight month of contraction.
“Companies in Nigeria continued to be negatively impacted by strong inflationary pressures in November, with new orders and output both falling as customers were either reluctant or unable to pay higher charges,” the PMI report said.
Seven banks recorded a cumulative FX gain of N1.2 trillion in the first nine months, up from N145.9 billion in the same period of 2022.
United Bank of Africa recorded the highest FX gain of N450.3 billion, up from N38.4 billion. Its profit after tax surged to N449.3 billion from N116.04 billion.
Zenith Bank recorded N378.1 billion as FX gain in the period under review, up from N11.1 billion. Its profit after tax rose to N434.2 billion from N174.3 billion.
Guaranty Trust Holding Company recorded N334.4 billion as FX gain, compared to a loss of N7.39 billion a year earlier. Its profit after tax jumped to N367.4 billion from N130.4 billion.
FCMB Group recorded N54.8 billion as FX gain, up from N1.35 billion. Its profit after tax increased to N49.2 billion from N22.9 billion.
Access Holdings recorded N50.7 billion as FX gain in the period under review, down from N96.9 billion. Its profit after tax rose to N115 billion from N48.26 billion.
Fidelity Bank recorded N25.0 billion as FX gain, up from N2.36 billion. Its profit after tax fell to N29.8 billion from N11.7 billion.
Wema Bank recorded N3.95 billion as FX gain as against N0.98 billion a year earlier. Its profit after tax increased to N19.24 billion from N8.18 billion.
Six FMCG firms recorded a cumulative FX loss of N269.5 billion in the first nine months of this year, compared to N13.6 billion in the same period of last year.
Nestle recorded the highest exchange loss of N127.5 billion, compared to a gain of N1.96 billion. It recorded a loss after tax of N43.1 billion as against a profit of N40.2 billion.
Dangote Sugar recorded an FX loss of N91 billion, up from N14.33 billion. The sugar maker recorded a loss after tax of N27.0 billion compared to a profit of N24.8 billion last year.
NASCON Allied Industries recorded N69 billion as FX loss, up from N0.445 billion. Its profit after tax rose to N11.01 billion from N2.88 billion.
BUA Foods recorded an FX loss of N33.28 billion. Its profit increased to N105.62 billion from N68.76 billion.
Cadbury Nigeria recorded an FX loss of N20.7 billion. It posted a loss of N10.2 billion compared to a profit of N68.8 billion a year earlier.
Unilever Nigeria however recorded an FX gain of N2.92 billion as against a loss of N0.48 billion last year. It made a profit after tax of N1.67 billion, compared to a loss of N0.35 billion.
Three brewers recorded an FX loss of N129.7 billion, compared to a loss of N8.32 billion.
Nigeria Breweries recorded the highest FX loss of N86.8 billion. It posted a loss of N57.2 billion, compared to a profit of N14.8 billion.
International Breweries recorded N39.9 billion as FX loss for the period. It recorded a loss after tax of N28.6 billion, up from N2.81 billion last year.
Guinness Nigeria recorded an FX loss of N2.96 billion. Its profit after tax fell to N2.56 billion from N2.75 billion.
Cement makers collectively recorded N135.4 billion as their foreign exchange loss from N78.6 billion.
Dangote Cement recorded the highest FX loss of N99 billion, followed by BUA Cement (N26.9 billion) and Lafarge Africa (N9.42 billion).
Dangote Cement recorded N277.6 billion as its profit after tax, up from N213.1 billion. BUA Cement recorded N76.1 billion as its profit after tax, up from N74.01 billion.
Lafarge Africa recorded N39.3 billion as its profit after tax, down from N44.9 billion.
Four drugmakers saw their combined FX loss increase by 740 percent to N13.2 billion in the first nine months of 2023.
GlaxoSmithKline recorded the highest FX loss of N11.3 billion, followed by Fidson (N1.01 billion), May and Baker (N0.89 billion) and Neimeth (N0.31 billion).
GSK recorded N448.08 million as its profit after tax, down from N483.5 million. Neimeth recorded a loss after tax of N572.2 million, up from N199.5 million. Fidson’s profit after tax increased to N3.57 billion from N3.44 billion.
May and Baker recorded N711.8 million as its profit after tax, up from N1.43 billion in 2022.
MTN Nigeria recorded an FX loss of N232.8 billion while Airtel Africa suffered a loss of $471 million.
MTN recorded N147.4 billion as its profit after tax, down from N269.0 billion. Airtel posted a $13 million loss after tax in the first half of 2023, down from the $330 million profit after tax in the same period of 2022.