By Kayode Sanni-Arewa

Twelve businesses suffered a cumulative foreign exchange loss of N1.40tn in 2024, as revealed in their unaudited financial statements, The PUNCH reports.

The losses, driven by the naira’s depreciation, highlight the deepening impact of forex volatility on corporate earnings across multiple sectors, including telecommunications, manufacturing, and food production.

Foreign exchange loss refers to the financial loss a company incurs due to fluctuations in currency exchange rates.

A review of financial reports from firms such as MTN Nigeria, Nigerian Breweries, Guinness Nigeria, BUA Cement, Oando Plc, and others showed a surge in foreign exchange-related losses compared to the previous year.

MTN Nigeria Communications Plc recorded the highest among the listed companies, reporting a staggering N925.36bn loss in 2024, a 25 per cent increase from the N740.43bn recorded in 2023.

Nigerian Breweries Plc reported a N157.59bn loss in 2024, a slight increase from the N153.33bn recorded in 2023.

BUA Cement Plc reported a N92.10bn loss in 2024, up from N69.96bn in 2023. The cement giant saw its bottom line weaken due to rising costs associated with forex fluctuations.

Oando Plc, an indigenous oil and gas company, reported an N64.17bn loss in 2024, a sharp contrast to the N132.69bn loss posted in 2023.

Guinness Nigeria Plc, a subsidiary of Diageo, suffered an N42.49bn loss in 2024, compared to a much smaller N3.89bn recorded in 2023.

BUA Foods Plc, a major player in the food processing sector, recorded N100.40bn in losses in 2024, significantly higher than N26.33bn in 2023.

Nestlé Nigeria Plc posted an N7.06bn loss in 2024, a significant turnaround from the N9.36bn forex gain recorded in 2023.

Honeywell Flour Mills Plc recorded an N8.56m loss in 2024, a sharp decline from the N20.19m reported in 2023.

Lafarge Africa Plc reported an N600.17m loss in 2024, significantly lower than the N14.91bn loss recorded in 2023.

The Nigerian Aviation Handling Company reported a N1.85bn loss in 2024, compared to a N509.33m gain in 2023.

Beta Glass Plc suffered a N2.00bn loss in 2024, compared to a N1.79bn gain recorded in 2023.

Nascon Allied Industries Plc recorded an N2.06bn loss in 2024, wiping out the N228.37m forex gain achieved in 2023. The company, a subsidiary of Dangote Group, struggled with increases.

Commenting, the Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, explained that the losses sustained by many manufacturing firms were largely due to their dependence on imported raw materials and the structure of their parent companies

Those manufacturing companies that have sustained these forex losses, for the fact they are listed, have parent companies and are multinationals. Some of the goods they received were probably sent on credit, and because exchange rates have changed, they are now forced to pay at the current rate,” he said.

He noted that the impact would extend beyond the companies themselves, affecting consumer demand and the overall economy.

There is a negative correlation between consumer demand and these forex losses. Consumers already have lower disposable income, and when companies increase prices due to forex fluctuations, demand drops further. This constrains company income, weakens investor confidence, and drives up finance costs,” he said.

Sanni warned that many firms may soon struggle to declare dividends due to the erosion of their profits.

“You can only pay dividends from profits. If they pay despite these losses, they risk running into negative shareholder funds. This might not be immediate, but eventually, banks will hesitate to lend more money to them,” he said.

He stressed that government policies must be structured to create a more favourable business environment, while companies must explore alternative raw materials to reduce dependency on imports.

“Since the naira is still unstable, companies need to rethink their financial strategies, reduce their exposure to dollar liabilities, and focus on cost-cutting measures that directly impact their bottom line,” he concluded.

Also, the Chief Executive Officer at Cowry Asset Management Limited, Johnson Chukwu, emphasised that the forex losses were a reflection of Nigeria’s weak external position rather than just a problem within the economy.

“It is not just about the economy; it is about our weak foreign exchange reserves. Manufacturing firms often have credit facilities, so when you see such wide exchange rate losses, it happens because of fluctuations in forex. It is a product of our weak foreign exchange reserves,” he explained.

He added that the prolonged forex instability had driven some companies out of Nigeria, further weakening investor confidence.

“Some companies have left Nigeria because of these forex losses. This has slowed capital flow and affected the willingness of foreign investors to commit to the country.”

The economist further stated that Nigerian companies must reassess their financial strategies to cushion the impact of forex fluctuations.

Given that these losses have happened, I believe companies should have wisely reduced their dollar positions since there is no assurance that the naira will remain stable,” he said.

The PUNCH reported that six companies listed on the Nigerian Exchange Limited recorded a combined foreign exchange loss of N255.72bn in their financial results for the year ended December 31, 2024.