MANUFACTURERS' FOREX LOSSES INCREASE BY 566% TO N792 BILLION.

Examining the performance of major domestic and international companies operating in the country for the fiscal year that ended in December 2023 reveals that the depreciation of the naira caused by the monetary policy reform resulted in a total loss of N792 billion in forex.

The Central Bank of Nigeria's (CBN) engagement in the FX market appears to be starting to pay off, though, since the value of the naira has been steadily rising, providing some respite to manufacturers.

Its prolonged survival is still questionable, advocating for strict fiscal policies to complement intended to support the naira.

Trade on the Nigeria Autonomous Foreign Exchange, or NAFEX, showed that the naira strengthened following the Central Bank of Nigeria's (CBN) disbursement of $1.5 billion on Wednesday owed to commercial bank customers.

According to FMDQ, Nigeria's currency rose to N1,301.00 per dollar during Friday's lunchtime trading but ended the day at N1,431.49 per dollar. The parallel market also saw positive movement, with the naira closing at N1,470 per dollar on Friday, up from N1,600 on Monday of the previous week.

This rise comes after the CBN said on Wednesday that it has paid off all of its verified foreign exchange debt.

Based on Financial Vanguard analysis, the 16 major manufacturing companies whose financial results were made public on the Nigerian Exchange Limited, or NGX, for the fiscal year that ended on December 31, 2023, recorded a combined foreign exchange loss of over N792 billion. This is a 566% increase from N118.9 billion in the corresponding period of 2022.

A 139% drop from the N503.862 billion profit before taxes declared in 2022, the firms also disclosed a combined loss before taxes of N196.788 billion.

The 16 total revenue of N6.356 trillion, up 28% from N4.967 trillion in 2022.

Companies that reported foreign exchange losses in 2023 included NASCON Allied (N8.539 billion), International Breweries (N57.599 billion), BUA Cement (N69.950 billion), Lafarge Africa (N21.0 billion), Guinness Nigeria (N49.1 billion), Cadbury Nigeria (N18.299 billion), Dangote Cement (N164,077 billion), and BUA Foods (N73.561 billion).

The remaining ones are: Unilever N6.945 billion; Notore Chemical N5,59 billion; Okomu Oil N0.277 billion; Vitafoam Nigeria N0.0103 billion; and Dangote Sugar N148.328 billion.

COMMENTS FROM COMPANIES

LAFARGE AFRICA: The business released its financial results for the entire year 2023 and noted that a substantial foreign currency loss had an effect on those figures. For the entire year 2023, Profit Before Tax (PBT) increased by 15.7% YoY despite N21 billion in foreign exchange losses. Net sales increased to 8.6% annually in FY 2023. According to Lafarge Africa, pressure from foreign exchange losses and a higher effective tax rate in 2023 caused a PAT decline of 4.7 percent year over year when the Pioneer Status Incentive ended in 2022.

Lolu Alade-Akinyemi, CEO of Lafarge Africa, states that “our business's fundamentals remain strong.” Despite extremely challenging macroeconomic difficulties, we improved operating profit from 22.6 to 25.3 percent and increased sales by 8.6% in FY 2023.

BUA CEMENT For the fiscal year that ended in December 2023, the company reported a PAT of N69.45 billion, a YoY decline of 31.2%. The main cause of the YoY fall in profits was the foreign exchange loss, which rose from N5.50 billion in 2022 to N69.95 billion in 2023.

Following the mid-year announcement of the currency rate's reunification, BUA Cement experienced a decline in profits due to the depreciation of the naira, similar to most other Nigerian manufacturing companies.

GUINNESS NIGERIA Due to its foreign exchange expenses, the company lost N5.233 billion in operating profit for the year that ended in December 2023.

The FX harmonization plan was the cause of the subpar results, according to former managing director John Musunga.

In this case, we lost a lot of money on retained earnings since we had to pay for the FX fluctuation. N18 billion in losses also resulted in an unfavorable profit and loss position for us. According to Musungu, if there are no retained earnings or if a loss is reported, dividends should not be handed out in accordance with best practices.

NESTLE NIGERIA: The company reported a N104 billion loss before taxes for the year that ended in 2023, compared to a N71 billion profit before taxes for the same period in 2022.

This is consistent with the company's financial statement for 2023, which was published on Wednesday, February 28, 2024, on the NGX.

A N195 billion foreign exchange loss was the main contributor to the total loss the company reported.

NIGERIAN BREWERIES: The country's biggest brewery reported an after-tax loss of N106.3 billion in 2023, its first deficit in six years, based on its audited financial records.

This comes after the brewer reported an extraordinary loss in foreign exchange last year as a result of the depreciation of the naira, which was N153.33 billion instead of N13.18 billion in after-tax profit in 2022.

CBN'S REACTION TO THE NAIRA'S DECLINE

The CBN has been implementing measures to increase foreign exchange and increase the value of the naira in the interim. Several circulars have been released to address financial services providers who participate in dishonest business practices and foreign exchange racketeers.

In the first circular, the central bank prohibited banks from offering their clients cash Personal Travel Allowance. It further ordered in a follow-up circular that International Oil businesses immediately repatriate all revenues to their parent corporations. In the third circular, the apex banks revised their protocols to prevent under- or over-invoicing imports and exports.