Out of seven surveyed sectors in the Nigerian Exchange Group, two reported foreign exchange gains while five reported losses, as naira devaluation in Africa’s fourth-biggest economy impacted companies, according to an analysis by BusinessDay.
The most significant impact was on companies with dollar-denominated loans, with those with substantial dollar reserves reporting increases in earnings.
Banks top the list of companies that benefited from the naira devaluation, though they reported a 43.9 percent decline in their FX gains amounting to N327.5 billion in the nine months of 2024. They are followed by the conglomerates sector that reported a significant rise in FX gains.
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. Other sectors like telecommunication, healthcare, cement makers, and brewing industries saw strong declines in their foreign exchange earnings as caused by naira weakness.
“Nigeria’s dependence on volatile oil prices makes it difficult to predict the future trajectory of the foreign exchange market. The value of the naira will be determined by the balance between the inflow of foreign exchange into the country,” a Lagos-based analyst said.
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Nigerian businesses across various sectors rely heavily on imported goods and services to support their production processes. This dependence on imports often exposes them to the risks of foreign exchange fluctuations, particularly when the local currency weakens.
Companies heavily reliant on imported raw materials or components have found themselves bearing the brunt of the FX strains, with their bottom lines taking a significant hit.
“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.
During its most recent Monetary Policy Committee (MPC) meeting in November, the central bank implemented a 25 basis-point rate hike, raising the monetary policy rate to 25.70 percent.
Despite these efforts, headline inflation climbed for the third consecutive month, reaching 34.60 percent in November, up from 33.88 percent in October, according to the National Bureau of Statistics.
The naira has maintained relative stability in the foreign exchange market, bolstered by inflows from the Nigerian diaspora returning home for Christmas, proceeds from a recent Eurobond issuance, and enhanced market transparency introduced by the CBN.
These factors have contributed to improved liquidity and confidence in the foreign exchange market, with the naira trading within a range of N1,660 to N1,525 per dollar in the official market and remaining stable at around N1,660 in the parallel market.
The naira, on Thursday, December 27th appreciated against the dollar, gaining N5 to close at N1,650/$ at the Nigerian Foreign Exchange Market (NFEM).
The unrelenting volatility of the naira against major global currencies has thrown companies into a state of uncertainty, making it difficult to plan effectively and secure sustainable growth.
Business activities in Nigeria have fallen for the fifth consecutive month in November as inflationary pressures remain elevated.
The latest monthly PMI by Stanbic IBTC Bank showed the headline index declined to 49.6 in November from 46.9 in October, attributing the sustained decline to persistent inflation and muted demand conditions, which have dampened business activity in the private sector.
“The inflationary environment and muted demand conditions meant that business activity continued to fall, the fifth month running in which that has been the case,” the report noted.
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Banks
Five banks out of eight surveyed recorded a cumulative unrealised FX gain of N327.5 billion in nine months of 2024, down from N527.5 billion in the same period of 2023.
Access Holdings Plc reported an FX gain of N84.4 billion compared to N50.7 billion in the corresponding period of 2023. Its profit after tax stood at N457.1 billion from N250.4 billion in the same period of 2023.
United Bank of Africa recorded the highest FX gain of N182.4 billion in the nine months of 2024 from N450.3 billion in 2023. Its profit after tax rose to N525.3 billion from N449.2 billion.
Fidelity Bank recorded N8.96 billion gain in 2024 from N24.9 billion in 2023. Its profit after tax increased to N224.6 billion from N91.7 billion.
FCMB Group recorded N37.8 billion from N54.8 billion. Its profit after tax increased to N82.3 billion from N49.1 billion.
Wema Bank recorded N14.2 billion as FX gain as against N3.95 billion a year earlier. Its profit after tax increased to N52.7 billion from N19.24 billion.
However, FBN Holdings, Zenith Bank, and GTCO reported FX losses amounting to N264.3 billion, N1.7 billion, and N1.74 billion, respectively.
Conglomerate
The conglomerate sector took second in the sectors that reported the highest FX gain in the nine months of 2024 amounting to N37.5 billion from N5.72 billion in the same period of 2023.
Custodian Investment Plc one of the listed conglomerates on NGX top the list with an FX gain of N23.9 billion from N8.6 billion. Its after-tax profit rose to N44.6 billion from N11.7 billion.
Followed by UAC Nigeria Plc reporting N10.1 billion in its FX gain as against N3.21 billion. Its after-tax profit rose to N13.6 billion from N8.7 billion.
Transnational Corporation Plc reported N3.5 billion in its FX gain compared to an FX loss of N6.09 billion. Its profit after tax rose to N75.9 billion from N22.7 billion.
Healthcare
Three drugmakers saw their combined FX loss marginally rise to N5.6 billion in the nine months of 2024 as compared to N5 billion in the same period of 2023.
Fidson Healthcare recorded the highest FX loss of N5.41 billion, followed by May and Baker (N192 million). However, Neimeth International didn’t report any amount to FX.
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Neimeth recorded a turnaround in profit amounting to N311 million from a loss after tax of N572.2 million. Fidson’s profit after tax fell to N3.4 billion as compared to N3.57 billion and May and Baker with N1.88 billion from N711 million.
Consumer Goods
Five out of six listed FMCG firms recorded FX losses in the first nine months of this year, compared to three in the same period of last year.
Nestle recorded the highest exchange loss of N285.2 billion in the first nine months of 2024 from a loss of N127.5 billion. It recorded a loss after tax of N184.2 billion from a loss of N43.1 billion.
Dangote Sugar recorded an FX loss of N224 billion, in its unrealised FX loss, with no value reported in the corresponding period of 2023. The sugar maker recorded a loss after tax of N184 billion as compared to a loss of N27.0 billion.
NASCON Allied Industries recorded N1.8 billion as an FX loss, up from N69 million. Its profit after tax fell to N8.95 billion from N11.01 billion.
BUA Foods recorded an FX loss of N87.9 billion from N33.28 billion. Its profit increased to N201.3 billion from N105.62 billion.
Cadbury Nigeria recorded an FX loss of N3.86 billion against N20.7 billion reported last year. It posted a loss of N11.8 billion from N10.2 billion.
Unilever Nigeria however recorded an FX gain of N5.14 billion from N2.92 billion last year. It made a profit after tax of N11 billion from N1.67 billion.
Brewers
Nigerian Breweries and Champion Breweries reported an FX loss of N161 billion as compared to N63.3 billion during the period.
However, Champion Breweries reported a gain of N3.84 billion from an FX loss of N39.9 billion.
International Breweries’ after-tax loss rose to N112,8 billion from N28.5 billion, Nigerian Brewery’s after-tax loss rose to N149.5 billion from N57.1 billion and Champion Breweries reported an after-tax profit of N21.4 billion from a loss of N77 billion.
Cement makers
Cement makers collectively recorded N300 billion in their foreign exchange loss from N135.4 billion.
Dangote Cement recorded the highest FX loss of N221.5 billion from N99 billion, followed by BUA Cement (N57 billion) and Lafarge Africa (N20.5 billion).
Dangote Cement recorded N279 billion as its profit after tax, up from N277.6 billion. BUA Cement recorded N48.9 billion as its profit after tax, down from N76.1 billion.
Lafarge Africa recorded N57.2 billion as its profit after tax, down from N39.3 billion.
Telecommunications
MTN Nigeria recorded an FX loss of N904.9 billion. During the period it reported an after-tax loss of N514 billion.
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