Devaluation: Govt, banks gain N2.2tn, manufacturers lose N495bn

Governments, at the federal, state, and local levels, and banks, gained about N2.21tn following the exchange rates unification policy of the Central Bank of Nigeria, findings by The PUNCH have shown.

The Federation earned N834.36bn as exchange difference revenue between June and August 2023, as the five top-tier Nigerian banks known as FUGAZ raked in about N1.38tn from forex revaluation gains.

The figure for the Federation’s exchange difference revenue was based on the monthly communiques from the Federation Account Allocation Committee.

The financial statements of First Bank, UBA, Zenith, Access, and GTB for the first half of 2023 were analysed for the forex gains.

However, some top manufacturers suffered foreign exchange losses of N495.36bn, according to their financial statements for H1, 2023.

On June 14, 2023, the CBN directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ Window of the foreign exchange market to enable its free float against the dollar and other global currencies.

It said, “The Central Bank of Nigeria wishes to inform all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters window.”

This led to an immediate decline in the value of the naira. The local currency fell from its 471/$ to 755.27/$ as of last week Friday at the Investors & Exporters FX window, according to data from the FMDQ Exchange.

As the exchange rate continued its volatility, naira worsened at the parallel market, hitting 1,000/$ last week.

The unification of the country’s exchange rate had significantly increased the revenue from exchange difference for the government and tier-1 banks, leaving many manufacturers in a mud of losses.

Government earnings

The unification of the country’s exchange rate significantly increased the revenue from exchange difference.

Exchange Difference revenue was N320.89bn in June 2023, which would be shared in July 2023.

This was far higher than the N0.64bn recorded as May 2023 revenue for sharing in June 2023.

Providing a breakdown of how the accrued revenue was shared among the three tiers of government, the communique read, “From the N320.89bn exchange difference revenue, the Federal Government received N156.16bn, the State Governments received N79.20bn, the Local Government Councils received N61.06bn and the sum of N24.47bn was shared to the relevant states as 13 per cent mineral revenue.”

An exchange difference is a difference resulting from translating a given number of units of one currency into another currency at different exchange rates.

For July, from the N283.9bn Exchange Difference revenue, the Federal Government got N141.28bn, the State Governments received N71.66bn, the Local Government Councils received N55.25bn and N15.72bn was shared to the relevant States as 13 per cent mineral revenue.

For August, exchange difference revenue was N229.57bn. A breakdown showed that “The Federal Government received N114.445bn from the N229.568bn Exchange Difference revenue. The state governments received N58.048bn, and the local government councils received N44.752bn.”

However, The PUNCH observed a steady decline in the exchange difference revenue from N320.89bn earned in June 2023, to N283.9bn in July, and N229.57bn in August.

Banks earnings

First Bank, UBA, Zenith, Access, and GTB – reported a combined N1.38tn from forex revaluation gains.

This showed an increase from about N63.86bn reported over the same period in 2022.

FBN Holdings as a group reported a foreign exchange loss of N98.4bn, compared to a gain of N16.51bn. However, as a company, there was a gain of N301m up from N2m loss.

UBA reported a foreign exchange gain of N418.3bn in H1 2023, up from N9.15bn in the same period of last year.

Zenith Bank also declared a FX revaluation gain of N355.59bn from N6.25bn loss in June 2022.

The total net foreign exchange gains of Access Holdings Plc rose by 362 per cent to N244bn in the first half of 2023 from N52.84bn recorded in the same period of 2022.

GTCO’s foreign exchange gain rose to N357.5bn from N1.87bn.

Earlier, the CBN issued a new circular stopping banks from recklessly spending gains made from forex revaluation.

Manufacturers suffer

While the government and some banks had benefitted significantly from the forex unification policy, a number of manufacturers had to count their losses.

The devaluation of the naira against the dollar led to some firms reporting significant FX losses in the first half of 2023.

Data compiled by The PUNCH showed that some major Nigerian manufacturers had reported a cumulative N495.36bn in FX losses in the second-quarter earnings season.

The firms include Nestle Nigeria, Dangote Cement, Dangote Sugar, Nigerian Breweries, Guinness Nigeria, International Breweries, Unilever Nigeria, and Neimeth.

Nestle recorded an FX loss of N123.77bn in H1, 2023, up from N2.13bn in the same period of 2022.

Dangote Cement’s net exchange loss on foreign-denominated transactions stood at N113.63bn in H1, 2023, up from N40.66bn in the same period of 2022.

Dangote Sugar’s exchange loss stood at N83.1bn in H1, 2023, up from N4.92bn in the same period of 2022.

Nigerian Breweries reported a net loss on foreign exchange of N70.6bn in the second quarter of 2022.

In the brewery sub-sector, Guinness Nigeria incurred N49bn in exchange rate loss in its 2023 half-year operations.

International Breweries’ net FX loss stood at N40.67bn in H1, 2023, compared to N4.09bn in the same period of 2022.

Unilever Nigeria’s revaluation loss increased to N14.36bn in the second quarter of 2023 from N1.06bn in Q1 2023.

The company said the revaluation loss arose from foreign currency-denominated balances related to trade loans.

“Revaluation loss arising from foreign currencies denominated balances in respect of trade loan,” Unilever said in a note.

Neimeth’s FX loss stood at N22.82m in H1, 2023, down from N103.15m in the same period of 2022.


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