The total foreign exchange loss of 17 firms in Nigeria surged by 536 percent in the first nine months of 2023, according to a BusinessDay analysis.
Findings from the firms’ financial statements showed the firm’s combined FX loss rose to N849.9 billion in the first nine months of this year from N133.5 billion in the same period of 2022.
The sharp increase in foreign exchange losses can be attributed to the naira devaluation and FX exposures on imported goods and services to support their production processes.
Further analysis revealed that fast-moving consumer good (FMCG) firms recorded the highest FX loss of N338.5 billion, followed by the telecommunication sector at N232.8 billion, cement makers (N135.4 billion), brewers (N129.7 billion) and healthcare (N13.5 billion).
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/$.
The devaluation caused an increase in the cost of doing business in Nigeria as firms operating in the FMCG, telecommunication and brewing industries saw their earnings decline due to losses caused by changes in foreign exchange rates.
“Various firms that rely on imported raw materials had more exposure to foreign exchange leading to a spike in foreign exchange loss,” Mustapha Umaru, equity research analyst at CSL Stockbrokers Limited said.
Firms’ analysis
FMCGs
FMCG firms recorded an FX loss of N338.5 billion in the nine months of 2023 from N16.9 billion recorded in the same period of 2022.
Nestle Nigeria recorded an FX loss of N127.5 billion from N1.69 billion. Dangote Sugar Refinery recorded N91 billion from N14.33 billion FX loss.
NASCON Allied Industries recorded an FX loss of N69 billion from N0.45 billion. BUA Foods had FX loss of N33.3 billion while no FX loss was recorded in the first nine months of 2022.
Cadbury recorded N20.7 billion while no FX loss was recorded in the same period of last year. Unilever recorded N2.92 billion FX loss from N0.48 billion loss
Telecommunication
MTN recorded a foreign exchange loss of N232.8 billion in the first nine months of 2023 from N27.9 billion in the same period of 2022. Airtel Africa recorded a loss of $471 million.
Cement makers
These firms recorded N135.4 billion FX loss in nine months of 2023 from N78.6 billion in the same period of 2022.
Dangote Cement recorded FX loss of N99.0 billion from N72.4 billion. BUA Cement recorded FX loss of N26.9 billion from N5.26 billion.
Lafarge Africa had N9.42 billion from N0.97 billion.
Healthcare
Firms in the pharmaceutical industry recorded FX loss of N13.5 billion in nine months of 2023 from N1.78 billion in the same period of 2022.
Nigeria relies heavily on imported drugs, active pharmaceutical ingredients and equipment used in drug manufacturing from China, India, Malaysia and the Netherlands.
Pharma West Africa, a major pharmaceutical exhibition in Africa, said that over 70 percent of medicines in Nigeria are imported, with medicines accounting for a chunk of the country’s total healthcare spend of $10 billion.
The healthcare sector in Nigeria has been hit hard by the FX crisis, with a major player GlaxoSmithKline (GSK), a British multinational pharmaceutical and biotechnology company, exiting the market.
GSK recorded an FX loss of N11.3 billion from N0.11 billion. Fidson Healthcare recorded an FX loss of N1.02 billion from N1.81 billion.
May & Baker recorded an FX loss of N0.89 billion from N0.24 billion. Neimeth recorded an FX loss of N0.31 billion from N0.11 billion.
Brewers
Brewers recorded an FX loss of N129.7 billion in nine months of 2023 from N8.31 billion in the same period of 2022.
Nigeria Breweries’ FX loss rose to N86.8 billion from N10.4 billion. International Breweries’ FX loss stood at N39.9 billion from N3.18 billion.
Guinness Nigeria recorded N2.9 billion FX loss from N1.13 billion FX loss.
