Market News

BY  Kelechukwu Mgboji

…top firms reel from forex losses

A financial storm has battered Nigeria’s corporate sector, with MTN Nigeria Communications Plc and six other blue-chip companies collectively incurring a staggering N2.06 trillion in foreign exchange (FX) losses in 2024.

This represents a 28.9 per cent surge from the N1.6 trillion recorded in 2023, underscoring the deepening financial strain on businesses amid the naira’s relentless depreciation.

The fallout has been devastating—eroding shareholder equity, forcing emergency financial restructuring, and even depriving investors of dividends for a second consecutive year.

The most affected companies include Nestlé Nigeria Plc, Dangote Cement Plc, Lafarge Africa Plc, BUA Cement Plc, Nigerian Breweries Plc, and Dangote Sugar Refinery Plc.

The primary catalyst for these colossal losses was the unification of Nigeria’s foreign exchange system, a policy spearheaded by President Bola Tinubu’s administration in June 2023.

The move, intended to stabilize the currency, instead triggered a series of devaluations, exacerbating financial distress for companies with dollar-denominated obligations.

By the end of 2024, the naira had plunged to N1,535 per dollar, compared to N907.1 per dollar at the close of 2023. This 69% depreciation sent shockwaves through corporate balance sheets, as foreign exchange liabilities ballooned when converted into local currency.

MTN Nigeria

Leading the pack of FX casualties, MTN Nigeria reported a crippling has suffered a staggering N2 trillion foreign exchange losses over the past two years, underscoring the relentless pressure of the naira’s devaluation and macroeconomic volatility on its financials.

In 2024 alone, the telecom giant posted N925.36 billion in foreign exchange losses—an alarming 23.7 per cent increase from the N740.43 billion in 2023.

The telco’s 2024 audited results published on February 27 painted a picture of resilience amid turbulence. Despite a 36.1 per cent surge in revenue to N3.36 trillion—driven by soaring data and voice earnings— MTN posted a net loss of N400.44 billion, a significant deterioration from the N137.02 billion loss recorded in 2023.

The primary driver: persistent naira depreciation (-41% y/y) and a steep rise in finance costs (+82.2% y/y), exacerbated by Nigeria’s elevated interest rate environment (MPR: 27.5%).

The telecoms giant’s net foreign exchange losses spiked by 25 per cent to N925.36 billion, up from N740.43 billion in 2023, reflecting the brutal impact of currency depreciation.

This, combined with surging lease expenses (+92.8% y/y) and higher energy costs (+43.4%), squeezed profitability, dragging EBITDA margin down by 9.6 percentage points to 39.1 per cent.

However, there was a silver lining. In Q4’24, MTN reversed its trajectory, posting a net profit of N114.49 billion—a remarkable turnaround from the N122.03 billion loss in Q4’23.

This was driven by cost optimization efforts, including renegotiated lease agreements with IHS, as well as a sharp reduction in net FX losses (-92.3% y/y). Despite these setbacks, MTN’s management expressed cautious optimism.

The telecom giant slashed its outstanding letters of credit (LC) obligations by 95 per cent, reducing its foreign currency exposure to just $20.8 million.

According to CEO Karl Toriola, “the reduction accounted for approximately 86% of the realized net forex losses of N561.9 billion, while the unrealized portion amounted to N363.4 billion.”

Toriola acknowledged the economic headwinds, particularly the naira’s volatility, which he said had driven up the company’s costs, including tower leases and other foreign currency liabilities.

“However, we took some comfort from the improvement in US dollar liquidity and reduced exchange rate volatility in the second half of the year,” he noted.

On the subscriber front, the company expanded its customer base to 80.9 million (+1.6% y/y), with data subscribers rising seven per cent to 47.7 million. Data consumption soared, with average monthly usage per customer jumping 33.6% y/y to 11.2GB.

Meanwhile, MTN’s 4G coverage expanded to 82.4 per cent, and 5G penetration reached 12.7 per cent, reinforcing its position as Nigeria’s leading digital connectivity provider.

Looking ahead, MTN’s management remains optimistic about a return to sustained profitability in 2025. Factors fueling this outlook include the recently approved 50 per cent tariff hike, a more stable currency environment, continued subscriber growth, and further cost-efficiency measures.

Despite enduring one of its most financially challenging periods, MTN Nigeria appears poised for a strong rebound. Dangote Cement and Sugar refineries hit hard Dangote Group’s cement and

For now, corporate Nigeria is in survival mode, navigating an increasingly hostile economic landscape where foreign exchange risks continue to dominate boardroom discussions

sugar divisions collectively absorbed a foreign exchange loss of N458.23 billion—marking a 36.3 per cent jump from the N336.27 billion recorded in 2023.

Dangote Cement Plc reported an FX loss of N249.3 billion, a staggering 52 per cent spike from N164.08 billion in 2023. Dangote Sugar Refinery Plc recorded N208.2 billion in FX losses, up 21.3 per cent from N172.2 billion the previous year.

Consumer Goods giants

Nestlé Nigeria Plc and Nigerian Breweries Plc, two of the country’s biggest consumer goods manufacturers, were not spared.

Nestlé Nigeria suffered a massive N290.7 billion in FX losses, leading to a loss before tax of N221.6 billion—more than double the N104.03 billion recorded in 2023.

Nigerian Breweries posted an FX loss of N157.59 billion, pushing its pre-tax losses to N182.92 billion, compared to N145.22 billion the previous year.

Highlight of Nestle’s financial performance for the full year ended December 31, 2024, reveal a complex picture of robust revenue growth countered by escalating finance costs and mounting losses.

The company’s revenue surged by 75.25 per cent year-on-year (YoY) to N958.815 billion, driven by strong domestic demand and strategic market expansions.

However, this impressive topline growth was tempered by a 97.75 per cent YoY increase in the cost of sales, which climbed to N652.460 billion, significantly compressing profit margins.

The multinational conglomerate recorded a 41.06 per cent year-on-year increase in gross profit, reaching N306.355 billion, reflecting sustained operational efficiency.

However, rising operational costs pressured the bottom line. Marketing and distribution expenses rose by 44.82 per cent YoY to N106.852 billion, while administrative expenses surged by 58.34 per cent YoY to N32.530 billion.

Consequently, operating profit growth lagged behind revenue expansion, increasing 35.62 per cent YoY to N167.876 billion.

Also, the company’s liquidity position weakened substantially, with cash and cash equivalents plummeting 86.50 per cent YoY to N22.642 billion, raising concerns over its ability to meet short-term obligations.

Although total assets expanded by 47.60 per cent YoY to N858.698 billion, reflecting continued investments, shareholders’ funds remained in negative territory at -N92.290 billion, despite an 18.27 per cent YoY improvement. Nestlé Nigeria’s CEO, Wassim Elhusseini, acknowledged the crisis, attributing the company’s losses to “high finance costs associated with the revaluation of foreign currency obligations due to an unprecedented devaluation of the naira.”

Dire outlook

Market analysts warn that the unrelenting naira devaluation is pushing highly leveraged firms toward financial instability.

Companies burdened with dollar-denominated debt are seeing their interest and principal repayments skyrocket, consuming a larger share of revenues and squeezing profitability.

David Adnori, Vice President of Highcap Securities Limited, noted that firms with significant foreign currency exposure now faced heightened risks.

He said: “With the naira’s depreciation, the cost of servicing dollar debt escalates, leaving companies with fewer resources to invest in growth. This could trigger a ripple effect across the banking sector and financial markets.”

The crisis has also cast a shadow over Nigeria’s investment climate. “Uncertainty regarding currency stability is making investors hesitant,” Adnori added.

According to.him, “domestic and foreign investors are taking a ‘wait-and-see’ approach, delaying capital inflows essential for economic growth.” For shareholders, the consequences are severe.

With mounting losses, several of these companies have suspended dividend payments for a second straight year—a move that has further rattled investor confidence.

Ambrose Omordion, Chief Operating Officer at InvestData Consulting Limited, underscored the broader impact on the stock market. He said: “Many Nigerian businesses have seen their shareholders’ equity wiped out.

The inability to declare dividends has hurt investor returns, eroding trust in the market.”

What lies ahead

While some companies, like MTN Nigeria, are working aggressively to reduce their foreign currency exposure, the road to recovery remains uncertain.