The performance review of multinational corporations and major indigenous firms operating in Nigeria for the financial year ending December 2023 reveals a staggering combined foreign exchange (forex) losses of N792 billion due to naira depreciation. This depreciation stemmed from monetary policy reforms, causing significant challenges for manufacturers.
However, there are signs of relief for manufacturers as the Central Bank of Nigeria’s (CBN) interventions in the forex market appear to be yielding positive results, with the naira gradually appreciating. Following the disbursement of $1.5 billion by the CBN to settle outstanding obligations owed to commercial bank customers, the naira experienced an uptick in both the Nigeria Autonomous Foreign Exchange (NAFEX) and parallel markets.
Despite these interventions, the financial statements of 16 major manufacturing companies released on the Nigerian Exchange Limited (NGX) for the financial year ended December 31, 2023, reveal a combined forex loss of over N792 billion, marking a significant increase from the previous year. Additionally, these companies recorded a combined loss before tax of N196.788 billion, indicating a challenging operating environment.
Notable companies affected by forex losses include Nestle Nigeria, Nigerian Breweries, NASCON Allied, International Breweries, BUA Cement, Lafarge Africa, Guinness Nigeria, Cadbury Nigeria, Dangote Cement, BUA Foods, Dangote Sugar, Okomu Oil, Notore Chemical, Vitafoam Nigeria, Beta Glass, and Unilever.
In response to their financial performance, some companies provided insights:
- Lafarge Africa reported significant forex losses impacting its profit before tax, despite achieving an increase in net sales.
- BUA Cement experienced a decline in profit after tax due to increased forex losses.
- Guinness Nigeria’s operating profit was eroded by forex expenses, leading to a loss for the year.
- Nestle Nigeria reported a loss before tax primarily due to substantial forex losses incurred during the year.
- Nigerian Breweries recorded its first loss in six years, attributing it to forex losses following naira devaluation.
Financial analysts, economists, and industry stakeholders have raised concerns about the implications of forex challenges on the economy, including job losses, reduced government income from company taxes, absence of dividend payments, closure of manufacturing plants, inflationary pressure, increased unemployment, and poverty rates.
In response, they advocate for robust fiscal policies to complement monetary policies in strengthening the naira and stabilizing the economy. Suggestions include prioritizing access to forex for manufacturing companies, promoting local production to reduce import dependency, and implementing measures to stabilize the exchange rate and reduce volatility in the forex market.
The CBN has implemented various measures to address forex challenges, including stopping cash payments for Personal Travel Allowance, reviewing guidelines to prevent under-invoicing and over-invoicing, and revoking licenses of Bureaux De Change operators. Additionally, the CBN allocated forex sales to Bureaux De Change to curb price distortions and stabilize retail demand.
Despite these interventions, sustained efforts are needed to address forex challenges effectively and ensure economic stability in Nigeria.
