Reforms: MTN, Nestle, Five Others’ Foreign Exchange Losses Up 967% to N1.56tn

Kayode Tokede

Following the recent Central Bank of Nigeria’s (CBN) foreign exchange market reforms, MTN Nigeria Communication Plc, Nestle Nigeria Plc, and five other companies recorded 967 per cent foreign exchange losses in 2023 to N1.56 trilliion from N146.35 billion reported in 2022.

Other six listed companies investigated by THISDAY with significant foreign exchange losses in 2023 include: Dangote Sugar Refinery Plc, BUA Cement Plc, BUA Foods Plc, Lafarge Africa Plc, Nigerian Breweries Plc, Cadbury Nigeria Plc and Eterna Plc.

The apex had recently 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 N907 against the dollar (Nigerian Autonomous Foreign Exchange Market rate) at the end of December 2023.

Consequently, most of the firms declared their worst performance in recent years, despite reporting significant increase in revenue.

In 2023, MTN Nigeria, followed by Nestle Nigeria, and Dangote Sugar Refinery recorded the highest foreign exchange losses, given their exposure to foreign exchange risk, primarily the US Dollar.

In the period under review, MTN Nigeria declared N834.28billion foreign exchange loss as against N90.97billion reported in 2022, while Nestle Nigeria reported N195.07 billiion foreign exchange loss in 2023 from N8.45billiion foreign exchange loss in 2022.

Also, Dangote Sugar Refinery declared N172.2billion exchange loss in the ordinary course of business net of exchange gain in 2023 from N1.89 billion in 2022. 

MTN in a statement said, “In 2023, we recorded a forex gain of N93.8 billion (58.3per centt unrealised) from the revaluation of our financial assets and a forex loss of N834.3 billion (82.8per cent unrealised) from the revaluation of our financial liabilities. These led to the reported net foreign exchange loss of N740.4 billion in 2023, bringing our “net finance costs” to N951.5 billion, up 341.9 per cent.”

This resulted in MTN Nigeria declaring loss before tax of N177.9 billion in 2023 from N518.8 billion profit before tax in 2022.

 “A depletion of our retained earnings and shareholders’ funds to negative N208 billion and N40.8 billion, respectively, “MTN added.

The CEO, MTN Nigeria, Mr. Karl Toriola in the statement said, “Navigating a challenging operating environment “2023 witnessed a very challenging operating environment characterised by rising inflation, currency devaluation and foreign exchange shortages, complicated by geopolitical disruptions and cash shortages in Q1 arising from a redesign of the naira.

“These factors created severe headwinds for our customers and our business during the year. The inflation rate increased throughout the year, reaching 28.9per cent in December 2023 – the highest reading in 18 years – with an average rate of 24.5per cent. This was further exacerbated by higher fuel prices, arising from the removal of the fuel subsidy in May 2023, with the average prices of diesel and petrol up by 66.4 per cent and 257.1per cent in 2023 to N1,416.8/litre and N600/litre, respectively.

“In June 2023, the CBN adopted a more liberal foreign exchange management system and reintroduced the ‘willing buyer, willing seller’ model. This has resulted in a 96.7per cent unfavourable movement in the exchange rate against the US dollar from N461.1/US$ in December 2022 to N907.1/US$ NAFEM rate in December 2023. This development contributed meaningfully to the upward pressure on the cost of doing business in Nigeria, and for MTN Nigeria in particular, significantly increased the costs in relation to our tower leases.”

The Managing Director and CEO of Nestlé Nigeria, Mr. Wassim Elhusseini in a statement stated that the devaluation of the Nigerian Naira in 2023 led to a revaluation of foreign currency obligations undoubtedly impacted the company financing cost and consequently the profit after tax.

 “However, we remain optimistic of our capacity to overcome the current economic difficulties and emerge stronger,” he said.

Also Nigerian Breweries Plc reported N153.33billion net loss on foreign exchange transactions               in 2023 from N26.34 billion in 2022 while BUA Cement reported N69.96billion foreign exchange loss in 2023 from N5.5biillion foreign exchange loss reported in 2022.

Other notable companies with foreign exchange loss include: BUA Foods with N73.56 billion foreign exchange loss in 2023 from Nil in 2022, while Cadbury Niigera posted N36.9 biilliion foreign exchange loss in 2023 from Nil in 2022;   Lafarge Africa posted N21.04 billion foreign exchange loss in 2023 from Nil in 2022.

The Managing Director, BUA Foods, Dr. Ayodele Abioye said, “This is a solid performance in the face of an unending challenging macro environment. BUA foods delivered strong growth despite the persistent devaluation of the naira during the period, which led to a substantial and negative impact of foreign exchange losses.”

Similarly, the Managing Director, Cadbury Nigeria, Oyeyimika Adeboye said the company sustained its current growth trajectory, despite the difficult operating environment in the country, due to its resilience as well as focus on revenue and cost management.

He said the massive devaluation of the Naira impacted negatively on businesses particularly operators in the fast-moving consumer goods (FMCGs) sector that rely on imported inputs.

She said the increase in the Company’s operating profit was an indication that the growth strategies that it has put in place are yielding fruit

“We operate in a challenging environment that requires a degree of creativity and tenacity to remain in business. Despite the strong economic headwinds we faced during the year under review, Cadbury Nigeria remains committed to delivering value for its various stakeholders and we shall continue to put our consumers at the heart of what we do, ”Adeboye added.

Meanwhile, capital market analysts are advocating for a re-evaluation of policies to safeguard the Nigerian Naira amid escalating forex rates, despite efforts by the CBN to stabilize its value, expressed concerns regarding the recent liberalization of the foreign exchange market.

Speaking, the Vice President, Highcap Securities Limited, Mr. David Adnori said he believe that the CBN were hasty in their decision to liberalise the foreign exchange market.

He noted that the CBN’s approach lacked comprehensive consideration of the market’s dynamics, particularly in light of the persistent low supply. 

He highlighted that while recent policies implemented by the CBN aimed to alleviate pressures in the FX market, they failed to effectively address underlying supply constraints.

He suggested that authorities might need to reassess their stance on foreign exchange management; potentially reverting to a more tightly managed floating exchange rate system. 

This approach, he explained, would afford policymakers the opportunity to concentrate on enhancing supply-side factors affecting FX, including increasing oil production, bolstering agricultural export revenues, and fostering foreign remittances. 

He emphasized the necessity for substantial and consistent inflows of FX, along with continuous augmentation of foreign reserves, for the sustainability of a free-floating Naira exchange rate.