Naira Depreciation Leads To N1.7 Trillion Loss For Major Corporations In Nigeria

The depreciation of the Naira has dealt a heavy blow to major corporations like Dangote Industries, MTN Nigeria, BUA, Nigerian Breweries, and Nestle Nigeria, resulting in a staggering loss of N1.7 trillion. This financial setback is mainly attributed to operations abroad and rising operating costs due to the volatile exchange rate.

MTN Nigeria, a leading telecom provider, suffered a significant blow, with an 804% increase in forex losses compared to the previous year. Likewise, FBN Holdings, a major player in banking, reported forex losses exceeding N350 billion, highlighting the widespread impact across sectors.

The banking sector and other businesses heavily reliant on foreign exchange bore the brunt, sparking concerns about potential exits of multinational corporations. The situation worsened after the Central Bank of Nigeria allowed the Naira to float in June 2023, increasing exchange rate volatility and complicating the financial landscape.

The Economist Intelligence Unit’s ‘Africa Outlook 2024’ report highlighted the challenges posed by high inflation and the growing gap between official and parallel market Naira rates. It predicted continued exchange rate instability and periodic devaluations in Nigeria and other African economies.

To combat these challenges, some companies have taken strategic measures. Cadbury Nigeria, for instance, proposed converting its outstanding $7.7 million loan into equity to address negative equity.

As Nigerian businesses grapple with Naira depreciation fallout, the Central Bank’s decision to change the official exchange rate calculation method in January 2024 aims to stabilize the currency. However, persistently high inflation and widening gap with the parallel market suggest ongoing exchange rate regime instability.

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