Nigerian Companies Incur N149Bn FX Losses Due To Persistent Exchange Rate Fluctuations



Nigeria’s persistent exchange rate fluctuations may have led to over N149 billion in exchange rate losses for some of the country’s largest companies. This is according to findings by Nairametrics.

Specifically, an analysis of financial statements of 32 companies who publish the impact of FX related transactions in their annual reports reveal combined losses of N81.2 billion in 2021 and N68.5 billion in 2020 (i.e. 149.7billion over 24 months). These companies cut across several sectors including Telcos, Cement, Energy, Food Processing, Brewery and Manufacturers.

These losses are a sliver of the FX related challenges which Nigerian businesses have grappled with over the trailing 24 months.

For context, the official USD exchange rate has deteriorated by over 40% from N307 per USD$1 as at 31st December 2019 to N435 per $1 as at December 2021.

Numerous economic analysts have attributed this alarming deterioration to a variety internal and external factors including oil prices decline, Covid-19 wave of lockdowns, as well as policy positions which are yet to attract foreign investors in a sufficient manner to invest in the country.

Nigeria’s apex bank, in its bid to curtain forex demand, also responded with a rash of policies in an attempt to manage forex utilization and facilitate availability.

Furthermore, recent CBN policies such as RT200FX are now aimed at encouraging exports and remittance of forex earning.

However, despite the best efforts of the CBN, dollar demand continues to outpace supply, thus the premium between the official and parallel-market exchange rate continues to widen by as much as N140.

From a business perspective, the lack of effective hedging options also makes the situation worse for business.

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According to our data, companies like MTN, Flour Mills, International Breweries, Dangote Cement rank high on the list of companies adversely impacted by FX related losses.

MTN suffered the largest exchange losses in 2021 at N22 billion (2020: N10billion) whilst International Breweries suffered the most losses in 2020 at N21.4billion (2021: N11.4billion)

Notably Flour Mills experienced second highest losses in both years at N11.6billion (2021) and N14.6billion (2020)


From a Nairametrics perspective, it is very likely that the FX losses could be higher than what is being reported on the annual statements. This is dependent on the actual exchange used when transactions are being executed.

For financial reporting purposes, quoted companies utilize the official exchange rate for their closing balances. For example, MTN reports it used NAFEX rate of N424.11/$1 as its closing exchange rate.

Furthermore, the actual amount used by companies for their exchange rate transactions will often reflect in operating expenses and interest expenses and occasionally these transactions are executed by sourcing funds from the parallel market. Thus, easily understating the losses reported .2022 could be worse

Whilst most companies have resorted to reducing their forex exposures, corporate Nigeria will likely suffer a similar fate in 2022 as FX losses persist in the first quarter of the year.

We believe it will take months if not years for most companies to seek local substitutes for their foreign inputs.In addition, most businesses still import their capital expenditure needs and will need to source forex to fund these investments.

Latest data from our sources suggest the exchange rate at the black market for wired transfers is already higher than N600/$1.We also believe companies with significant foreign denominated loans will continue to incur severe exchange rate losses either from their balances or through their interest expenses.

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Credit: Nairametrics 


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