The financial statements of multinational corporations and major indigenous companies for the fiscal year ending December 2023 reveal a staggering surge in combined Foreign Exchange (forex) losses, amounting to N792 billion.
This increase, reaching a remarkable 566%, is primarily attributed to the depreciation of the Naira prompted by reforms in monetary policy.
While there appears to be a glimmer of hope for manufacturers due to the Central Bank of Nigeria’s interventions in the forex market, analysts remain cautious, advocating for robust fiscal policies to complement monetary measures aimed at bolstering the Naira’s value.
Recent trading activities in the forex market indicate a positive trend, with the Naira gaining ground following the Central Bank’s disbursement of $1.5 billion to settle outstanding obligations owed to commercial bank customers.
This improvement is evident in both the Nigeria Autonomous Foreign Exchange (NAFEX) and parallel markets.
Analyzing the financial reports of 16 prominent manufacturing firms listed on the Nigerian Exchange Limited (NGX) for the fiscal year ending December 31, 2023, reveals a significant FX loss of over N792 billion, marking a substantial increase from the previous year.
Despite a notable increase in revenues, these companies collectively experienced a decline in profits before tax.
Among the companies affected by forex losses in 2023 are 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.
Several companies have released statements addressing the impact of forex losses on their financial performance.
For instance, Lafarge Africa reported increased profits but highlighted significant FX losses, while BUA Cement experienced a decline in profits primarily due to forex losses.
Similarly, Guinness Nigeria cited foreign exchange expenses as a major factor contributing to operating losses, while Nestle Nigeria reported a significant loss before tax, primarily attributed to forex losses.
Financial analysts and stakeholders in the manufacturing sector warn of the grave economic implications of continued forex challenges, including job losses, reduced government income tax earnings, absence of dividends for shareholders, potential plant closures, exacerbation of inflationary pressures, and increased unemployment and poverty rates.
To address these challenges, suggestions include prioritizing access to forex for manufacturing companies, promoting local production to reduce import dependency, implementing policies to stabilize the exchange rate, and enhancing infrastructure to stimulate domestic manufacturing capacity.
Meanwhile, the Central Bank of Nigeria has implemented various measures to stabilize the forex market and bolster the value of the Naira, including cracking down on forex racketeers and revising guidelines to prevent under-invoicing of exports and over-invoicing of imports.
Additionally, the CBN revoked the operational licenses of thousands of Bureau De Change operators and allocated FX sales to curtail price distortions at the retail level.
