With N2.14bn Net FX Gain, BUA Cement Smile as Dantoge, MTN, Others Rue N653bn Loss

Kayode Tokede

BUA Cement Plc reported N2.14 billion net foreign exchange gain in half year (H1) ended June 30, 2023 from N1.05billion in half year ended June 30, 2022, becoming the sole company investigated by THISDAY to escaped foreign exchange losses among listed firms on the Nigerian Exchange Limited (NGX).

This is coming on the back of the Central Bank of Nigeria’s (CBN) recent foreign exchange operations changes.

The likes of MTN Nigeria Communication Plc, Nestle Nigeria Plc, and eight others declared N653.12billlion foreign exchange loss in H1 2023 from N47.9 billion foreign exchange loss reported in H1 2022.

The remaining eight are: Dangote Cement Plc, Nigerian Breweries Plc, Eterna Plc, Seplat Petroleum Plc, GlaxoSmithKline (GSK) Plc, Neimeth International Pharmaceuticals Plc, International Breweries Plc and Dangote Sugar Plc.  

Foreign exchange loss on foreign-denominated transactions is due to the material devaluation of the Nigerian Naira in June 2023.

The apex bank had announced changes in the Nigerian foreign exchange operations, which required the immediate collapse of all segments of the market into the Investor & Exporter (I&E) foreign exchange window and reintroduced the ‘willing buyer, willing seller’ model.

The Naira moved from N465 against the dollar at end of May 2023 to close at N756 against the dollar in June 2023, giving rise to a net exchange loss of these companies from third party loans and payables in the Nigerian entities.

The CBN under the new administration of President Bola Tinubu has aggressively introduced new foreign exchange policies in a move to liberalise the market and attract more inflow.

In the period under review, MTN Nigeria declared N131.45billion net foreign exchange losses, a growth of 864.5per cent from N13.63billion reported in H1 2022.

Amid significant foreign exchange losses, MTN Nigeria declared N200.4billion profit before tax in H1 2023, a drop of 25.4 per cent from N268.64 billion reported in H1 2022.

The Chief Executive Officer, MTN Nigeria, Mr. Karl Toriola in a statement stated that the impact led to the company’s approximately 60 per cent movement in the exchange rate.

According to him, “The liberalisation of the forex regime and removal of the fuel subsidy provide a clear pathway to the return of international capital into our capital markets, and foreign direct investment which will drive economic activity in the medium term, improve the operating environment, and are net positive for our longer-term outlook.

“The immediate impact on our results for H1 was the unrealised foreign exchange losses included in our net finance charges. There was no material impact on the EBITDA margin due to the nature of our tower contracts, which require us to make quarterly payments at the beginning of each quarter.”

Another multinational company, Nestle Nigeria reported    N123.8 billion net foreign exchange loss in H1 2023 from N2.13 billion in H1 2022.

Nestle closed the period with N69.12billion loss before tax from N43.74billion profit before tax reported in corresponding period of 2022.

 As Dangote Cement declared N113.63billion net exchange loss on foreign denominated transactions in H1 2023 from N40.66billion in H1 2022, its profit before tax stood at N239.86billion, a decline of 9.4per cent from N264.89billion in H1 2022.

The foreign exchange component of Dangote Cement’s loans is N217.4 billion made up of letters of credit as of June 30, 2023 from N158.43 billion reported in full year ended December 31, 2022.

The cement manufacturing company reported N801.26billion total borrowings as of June 30, 2023 from N706.73billion in 2022 FY.

From the loans breakdown, it explained that, “Bank loans include Letters of credit (LCs) obtained to finance inventories, property, plant and equipment, etc. The average interest rate is SOFR plus 10 per cent.”

Among the top companies affected with the policy is Nigerian Breweries that reported N85.26billion Net loss on foreign exchange transactions in H1 2023 from N7.28billion in H1 2022.

The multinational breweries company also declared a loss of N47.6billion in H1 2023 from N18.74billion in H1 2022.

However, S&P Global Ratings had acknowledged that the improved outlook comes after Nigeria’s new leader scrapped costly fuel subsidies, removed the Governor of the CBN, and overhauled the nation’s exchange rate policies.

Market analysts, Ravi Bhatia, Samira Mensah, and Juili Pargaonkar, believe the new government is moving ahead with a series of reforms that could, if delivered, benefit growth and fiscal outcomes.

“We believe these measures will gradually benefit Nigeria’s public finances and its balance of payments,” the analysts added.

However, the analysts noted that Nigeria’s planned fiscal spending and inflation remain high, adding that Nigeria and other countries in the West African region may also face geopolitical risks tied to the recent coup in neighboring Niger.