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Insight & Analysis - August 2, 2023

5 Nigerian Companies that Lost the Most Money Due to Naira Devaluation

The Nigerian business landscape has been grappling with significant challenges as naira devaluation wreaks havoc on some of the country’s biggest listed firms. In the first half of 2023, foreign exchange losses have taken a toll on corporate financials, posing threats to their ability to pay dividends for the 2023 financial year. This article delves into the experiences of five major Nigerian companies that have been hit hardest by naira devaluation, as they struggle to cope with the adverse effects on their bottom lines.

Guinness Nigeria Plc

Guinness Nigeria Plc, one of Nigeria’s leading breweries, has faced a tumultuous year, recording N49 billion in exchange rate losses. The depreciation of the naira led the company to incur a staggering N18.1 billion loss, marking its biggest full-year loss since the onset of the Covid-19 pandemic in 2020. With a loss per share of N8.29 kobo compared to N7.15 earnings per share in the previous year, the company’s retained earnings dropped by a substantial 81 percent to N7.88 billion. Analysts are skeptical about the likelihood of dividend payments for the year, as the company navigates through challenging times without sufficient buffers.

Nigerian Breweries

Nigerian Breweries, another prominent player in the brewing industry, also suffered the brunt of naira devaluation. FX losses for the company spiked by a staggering 1,071 percent to N85.26 billion in the first half of 2023 from N7.28 billion in the same period last year. Although the company maintains a healthy cash balance of N34.9 billion, the losses contributed to a N47.7 billion reduction in net assets. With retained earnings dropping to N33 billion, the company faces significant challenges in meeting dividend obligations amidst the prevailing business environment and heightened production costs.

Unilever Nigeria Plc

Unilever Nigeria Plc, one of the country’s major manufacturing goods firms, recorded a revaluation loss of N14.36 billion, a significant increase from N1.06 billion in H1 2022. Additionally, restructuring costs rose to N2.36 billion from N0.48 billion in the previous year. The company attributed the revaluation loss to foreign currency-denominated balances related to trade loans. As a result, retained earnings dropped to N9.2 billion in Q2 2023 from N5.11 billion recorded in the same period of 2022. The impact of these losses has raised concerns over the company’s ability to pay dividends this year.

Nestle Nigeria Plc

Nestle Nigeria Plc, a renowned fast-moving consumer goods firm, incurred a staggering N123.8 billion net foreign exchange loss in H1 2023 compared to N2.13 billion in H1 2022. This led the company to close the period with a loss before tax of N69.12 billion, a significant decrease from the N43.74 billion profit before tax recorded in the same period of 2022. The substantial losses wiped out Nestle’s retained earnings, amounting to a retained loss of N49.14 billion, a stark contrast to the retained earnings of N28.37 million the previous year. The company faces challenges in fulfilling dividend payments due to these adverse developments.

Airtel Africa Plc

Airtel Africa Plc, a leading communication firm, reported a loss after tax of $151 million in H1 2023, representing a 184.7 percent decrease from the profit after tax of $178 million in the same period of 2022. The company’s loss was primarily driven by the $570 million incurred in foreign exchange and derivative losses, further exacerbated by a loss before tax of $221 million. Consequently, the earnings per share for the period declined to a negative of 4.5 cents, a significant drop from 4.4 cents in the same quarter of 2022. As the naira’s devaluation continues to impact the company’s financials, dividend payment prospects remain uncertain.

All in all, naira devaluation has emerged as a formidable challenge for Nigeria’s major companies, hindering their financial stability and potential to pay dividends for the 2023 financial year. While some companies struggle to cope with the losses and maintain profitability, dividend payment remains at risk for many, leading investors to keep a watchful eye on these corporate giants amidst the prevailing uncertainties in the Nigerian business landscape.

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