In 2024, the Nigerian economy faced significant challenges due to the sharp devaluation of the naira. This depreciation profoundly impacted several leading companies, particularly those with substantial foreign currency obligations. The resultant foreign exchange (forex) losses eroded profits and, in some cases, led to substantial financial deficits. This article delves into the financial performances of key Nigerian firms, examining how the naira’s devaluation affected their operations and bottom lines.
MTN Nigeria: Telecom Giant’s Financial Turmoil
MTN Nigeria, the country’s foremost telecommunications provider, experienced unprecedented financial setbacks in 2024. The company reported a staggering loss after tax of N400.44 billion for the year ending December 31, 2024. This marked a 192% increase from the N137.02 billion loss recorded in 2023. The primary culprit behind this downturn was the sharp depreciation of the naira, which significantly inflated MTN’s foreign currency-denominated obligations. Forex losses surged to N925 billion, up from N740 billion the previous year, as the naira depreciated from N907/$1 at the end of 2023 to N1,535/$1 by December 2024. Despite a 36% revenue increase to N3.36 trillion, driven by sustained demand for data and digital services, these forex losses overshadowed operational gains.
In response to these challenges, MTN Nigeria implemented several strategic measures to mitigate forex exposure. The company focused on reducing outstanding letters of credit obligations, which are predominantly tied to capital expenditures in foreign currencies. By March 2024, MTN had reduced these obligations to $243.4 million from $416.6 million in December 2023, utilizing restricted naira cash balances. Additionally, MTN reassessed its tower lease contracts, many of which are dollar-denominated, to align expenses more closely with naira earnings.
BUA Foods: Resilient Performance Amid Forex Challenges
BUA Foods demonstrated resilience in the face of forex volatility. In the second quarter of 2024, the company reported a pre-tax profit of N76.8 billion, a 24% year-on-year growth from N61.8 billion in Q2 2023. This achievement came despite incurring an FX revaluation loss of N27.4 billion during the same period. Revenue for Q2 2024 stood at N315.5 billion, marking a 79% increase from N176.6 billion in Q2 2023. The company’s diversified product portfolio, including sugar, flour, and pasta, contributed to this robust performance. Sugar sales reached N369.7 billion, up 88% from H1 2023, while flour sales surged by 164% to N227.9 billion. BUA Foods attributed this growth to the launch of new products and expansion into new markets.
Nigerian Breweries: Brewing Sector’s Financial Strain
Nigerian Breweries faced significant financial strain due to the naira’s devaluation. The company reported a net loss of N106 billion for the year, primarily attributed to a foreign exchange loss of N153 billion. Despite a 9% revenue growth compared to the previous year, operating profit declined by 15% due to higher input costs and one-off reorganization expenses. The board expressed confidence in leveraging the company’s 77-year experience to navigate the challenging economic environment, emphasizing resilience and strategic planning to cope with current realities.
Nestlé Nigeria: Food and Beverage Giant’s Financial Woes
Nestlé Nigeria, a leading player in the food and beverage sector, reported a significant after-tax loss of N176.9 billion in the first half of 2024. This marked a substantial increase from the N49.9 billion loss recorded during the same period in 2023. The company attributed this downturn to the devaluation of the naira, which led to the revaluation of foreign currency obligations and adversely impacted profits. Despite a revenue increase to N406.9 billion from N261.8 billion, the escalating cost of sales, which rose to N279.7 billion from N154.4 billion, further strained financial performance.
Cadbury Nigeria: Confectionery Sector’s Currency Challenges
Cadbury Nigeria Plc faced considerable challenges due to currency fluctuations. In the second quarter of 2023, the company reported a loss before tax of N17.9 billion, a stark contrast to the N800 million profit recorded in the same period in 2022. This downturn was primarily due to a substantial exchange rate loss of N20.9 billion, stemming from the unification of the naira and its subsequent depreciation from approximately N460/$1 to about N790/$1. Despite these challenges, Cadbury managed to grow its revenue by 26% to N19 billion, and gross profit increased by 176% to N7.2 billion. Operating profit also saw a 64% increase year-on-year to N1.5 billion, indicating underlying operational strength despite forex-induced losses.
Broader Economic Implications
The substantial forex losses experienced by these companies underscore the broader economic challenges posed by currency devaluation. Businesses with significant foreign currency exposure faced increased costs, eroding profitability and, in some cases, leading to negative shareholder equity. The devaluation also heightened the cost of imported raw materials and capital goods, further straining operational margins.
In response, companies adopted various strategies to mitigate forex risks. These included reducing dollar-denominated liabilities, renegotiating contracts to align with local currency earnings, and implementing cost optimization measures. Additionally, some firms explored local sourcing alternatives to reduce reliance on imported inputs, thereby minimizing exposure to currency fluctuations.
