Some financial analysts say a more stable foreign exchange market will propel big corporations to return to profitability in the 2024 fiscal year.
Several firms, including Nigerian Breweries, MTN and Nestle, were hard hit by FX crunch in 2023, with their margins severely hurt.
Speaking on the impact of the naira exchange on corporate performance, Managing Director and Chief Executive Officer of Lyceum Alliance Limited, a financial advisory and management consulting firm, Dr. Jekwu Ozoemena, said he expects a positive economic outlook as the country’s currency continues to stabilize against the dollar and other major international currencies.
Jekwu, who is a former Managing Director of Access Bank Zambia, in a chat with Nairametrics, blamed the poor performance of a company like Nigerian Breweries on the steep devaluation of the Naira in the foreign exchange market.
He noted that with the recent gains of the Naira against the dollar and the expected stability of the currency over the remaining months of the year, the expectations are that most companies operating in Nigeria that were adversely affected by the unstable periods of the naira will recover and return to profitability.
On the business recovery plans recently announced by the brewing giants, Ozoemene commended the initiatives, arguing that it is indicative of a management committed to retaining and rewarding the trust of its shareholders.
Ike Ibeabuchi, Chief Executive Officer, MD Services, said FX instability could steer firms’ rebound and boost their capacity to create value.
He cited MTN and Nestle as firms that have the capacity to make a strong comeback next year as Naira continues to strengthen in the FX market.
“This could help to reduce MTN’s tower lease costs which make up half of its FX exposure. It could also lower costs for Nestle and other large enterprises. The main issue is that we need them back to create jobs and boost our economy,” he noted.
Abdulmumin Ali, Managing Partner of QL Resources, emphasized Nigeria’s currency rebound, attributing it to the resilience, energy, and creativity of its people.
He predicted that the FX instability, stemming from the 2023 depreciation of the naira, will likely subside in 2024, paving the way for favorable returns for many companies.
Ali voiced his confidence in the forthcoming resurgence in corporate performance. Reflecting on Nigerian Breweries’ business recovery plans, he noted the company’s strategies as indicative of broader economic reflation on the horizon.
He commended Heineken, the majority shareholder of the company, for restating their commitment to the Nigerian market by opting to raise 50% of the N600 billion being sought through the Rights Issue, insisting it was a good sign that the fundamentals of the Nigerian economy remain positive.
Nigerian Breweries reported a net loss of N153.3 billion on foreign currency transactions which resulted in a pre-tax loss of N145.2 billion in FY 2023.
In its financial statement for FY 2023, MTN Nigeria reported a N2.47 trillion revenue, representing a 22.7% growth in revenue. However, with an accrued net foreign exchange loss of N740.4 billion, the group recorded a pre-tax loss of N177.9 billion.
On the other hand, Nestle recorded a loss before tax of N104 billion for the year ended 2023 compared to a profit before tax of N71 billion same period in 2022.
The drop was largely due to a foreign exchange loss of N195 billion, which was the major reason for the overall loss reported by the company.
The 2023 results were impacted by the significant shifts in the business landscape with substantial impact on businesses and livelihoods nationwide.
These included the redesign of the naira notes which resulted in cash shortages that severely hampered social and economic activities nationwide and set the tone for a turbulent year.
High double-digit inflation rates (with food inflation at more than 30%), removal of subsidy on premium motor spirit (fuel), devaluation of the naira, and foreign exchange scarcity have further exacerbated the already difficult environment for the populace and businesses.