Some companies have reported foreign exchange gains in their Q2 earnings report on the back of naira devaluation.
Data compiled by BusinessDay showed that Lafarge Cement, AXA Mansard, Fidelity Bank, and UAC of Nigeria all recorded FX gains in the first six months of 2023.
Lafarge Cement recorded an FX gain of N2.2 billion in H1 2023.
The firm’s profit after tax decreased to N35.4 billion from N37.4 billion in the same period of 2022.
Its finance income also increased to N4.4 billion from N191 million.
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Axa Mansard, an insurance company, recorded an FX gain of N11.1 billion in H1 2023, which is related to the investments it holds in FX, compared with a loss of N0.578 billion in the same period of 2022.
The firm reported a profit after tax of N13.1 billion, up from N1.9 billion a year earlier.
In the banking sector, Fidelity Bank recorded an FX gain of N33.19 billion in H1 2023, up from N2.5 billion in the same period of 2022.
“Net foreign exchange gain represents unrealised gains from the revaluation of foreign currency-denominated assets and liabilities held in the non-trading book,” Fidelity Bank said.
The bank’s profit after tax grew to N53.2 billion from N22.8 billion.
UAC of Nigeria plc, the country’s oldest conglomerate, reported an FX gain of N3.6 billion in H1 2023, compared with a loss of N337 million in the same period of last year.
Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, said the level of exposure to foreign currency determines whether a company will gain or lose from currency fluctuations.
“The greater the amount of exposure to foreign currency, the higher the risk of exchange rate fluctuations, which could have a serious impact on any company with that exposure,” Yusuf said.
He added: “Companies with naira-denominated assets will benefit from the recent currency devaluation, as the value of their assets will increase in dollar terms.
“However, companies with naira-denominated liabilities will be penalised, as the value of their liabilities will increase in dollar terms.”
Ngozi Odum, financial services analyst at CardinalStone, said banks can book FX income through investments in FX instruments, FX trading, and FX revaluation.
“These examples are not exhaustive as banks have other means to book FX,” Odum said.