Several major Nigerian companies, including Dangote Group, Nestle Nigeria, and MTN Nigeria, as well as four other highly capitalized firms, lost a total of 1.7 trillion Nigerian naira in 2023 due to the depreciation of the naira. This loss was mainly attributed to foreign exchange-related problems. Dangote Industries, the largest conglomerate in Nigeria, reported a 164 billion naira FX loss in 2023, primarily due to its operations in other countries. BUA, another manufacturing giant, also reported a forex loss of 69.9 billion naira, representing a significant increase from the 5.5 billion naira recorded in 2022.
Nigerian Breweries’ audited 2023 financial report showed a loss of 153 billion naira, a sharp contrast to the 26.3 billion naira recorded in 2022. The forex loss had a massive impact on the firm’s overall performance in the 2023 financial year, driving its net loss to 106 billion naira. FMCG giant Nestle Nigeria recorded forex-related losses of an undisclosed amount due to the depreciation of the naira, while its operating cost increased by 41.2% to 2.7 billion naira. Cadbury Nigeria also reported a loss of 36.93 billion naira due to exchange rate differences in 2023.
The currency-related challenge negatively impacted the company’s financials in 2023, with a negative equity of 15.08 billion naira recorded, reflecting a 213% decrease from the previous year. Cadbury Nigeria has proposed a strategic move to address its financial structure by converting its outstanding $7.7m loan payable to its major shareholder, Cadbury Schweppes Overseas Limited, into equity. MTN Nigeria recorded a staggering forex loss of an undisclosed amount, representing an 804% increase compared to the 81.8 billion naira recorded in 2022. In the banking industry, FBN Holdings took a significant forex loss valued at more than 350 billion naira in the 2023 financial year. Cumulatively, the seven firms lost a total of 1.7 trillion naira due to the depreciation of the naira. The exchange rate’s volatility has had devastating consequences for firms with significant forex exposure, with the Central Bank of Nigeria floating the local currency in June 2023 to find its true value.
The Economist Intelligence Unit’s ‘Africa Outlook 2024’ warns that high inflation and the gap between the official and parallel market rates of the naira will continue to fuel exchange rate instability and result in periodic devaluations. It also predicts double-digit currency depreciation in the major economies of Egypt, Sudan, Ethiopia, Angola, and Nigeria.
In January 2024, the CBN changed the methodology for calculating the official exchange rate, leading to a further devaluation of the naira, with the local currency reaching an all-time low of 1,800 naira per dollar in February. The sudden shift in the exchange rate floating didn’t give firms enough time to brace for the impact, leading to uncertainty about the future profitability of multinational companies operating in Nigeria.