Ten major consumer goods companies in Nigeria collectively suffered a staggering foreign exchange loss of N987.7 billion last year due to the devaluation of the naira, as per data compiled by BusinessDay.
The companies affected include Cadbury Nigeria Plc, Nigerian Breweries Plc, Nestle Plc, Dangote Sugar Refinery Plc, International Breweries Plc, PZ Cussons Nigeria Plc, Guinness Nigeria Plc, Dangote Cement Plc, BUA Cement Plc, and Lafarge Africa Plc.
The FX losses recorded by these firms in 2023 soared over sevenfold compared to the previous year’s figures, with Cadbury being the exception, reporting no FX gains or losses in 2022.
Notably, PZ Cussons and Guinness reported FX losses of N87.1 billion and N15.7 billion, respectively, for the six-month periods ending November and December, respectively. These figures represent significant increases from the previous year’s corresponding periods.
According to industry experts, the massive devaluation of the naira, from about N450/$ to almost N1,600/$, severely impacted these companies, which rely on foreign liabilities for raw materials and other essentials.
Israel Odubola, a Lagos-based research economist, explained that the widening FX losses were a direct consequence of the naira’s depreciation, which led to higher finance costs for these companies.
Further analysis of the financial statements of these firms revealed significant after-tax losses for some, with Cadbury, Nigerian Breweries, Nestle, International Breweries, and Dangote Sugar collectively posting a loss of N346.7 billion in 2023.
The increase in petrol prices and foreign exchange costs contributed to a surge in the country’s headline inflation rate, which rose to 29.90 percent in January 2024. This inflationary pressure, coupled with the devaluation of the naira, has exacerbated the challenges faced by businesses and consumers alike.
Amidst the economic turmoil, several multinationals have announced plans to exit Nigeria, citing the uncertain business environment. The decline in tax revenue from local companies and reduced foreign investment further underscore the severity of the situation.
As Nigeria navigates these economic challenges, experts remain cautious about the country’s economic outlook, emphasizing the need for proactive measures to address inflation, liquidity dynamics, and currency challenges in the coming months.
