Airtel Africa Plc (NGX: AIRTELAFRI) has said that the devaluation of the Nigerian currency, naira, will negatively impact its revenue, EBITDA and finance cost.
The company disclosed this in filing with the Nigerian Exchange on Tuesday.
According to Airtel, a “1% devaluation in the Nigerian naira would have a negative impact of $22m on revenues, $12m on EBITDA and $7m on finance costs (excluding derivatives) on a 12- month basis.”
“Additionally, the direct impact of 1% devaluation in the Nigerian naira on derivative instruments held by the Group would have a negative impact of approximately $1.5m,” it added.
Airtel Africa, which reports its earnings in US dollars, noted that the weighted average exchange rate used in the profit and loss statement for the 12 months ended 31 March 2023 was approximately 440 NGN/USD, and the rate used to prepare the balance sheet as of 31 March 2023 was 461.4 NGN/USD.
Following the floating of the naira by the Central Bank of Nigeria at the I&E Window, naira has further depreciated, closing at N770.38/$1 on Monday, this shows a 75% devaluation in naira compared to the rate of N440/USD Airtel used in its profit and loss statement for the 12 months ended 31 March 2023.
According to Airtel Africa, 1% devaluation will have a negative impact of $22m on revenues. Thus, by implication, 75% devaluation will have a negative impact of $1.65 billion on its revenues in 12 months.
The company however, is hopeful that the new foreign currency policy and subsequent realignment of the several market exchange rates will provide greater US dollar liquidity and help to alleviate the challenges faced in the last few years to access US dollars in the market.
It further noted that the USD component of operating costs within the Nigerian business – it largest market is minimal and, therefore, “we do not anticipate a material impact on the EBITDA margin.”
Airtel Africa grew its revenue by 11.5% to $5,255m in the year ended 31 March 2023. Its EBITDA increased 11.4% to $2,575m while profit after tax was $750m, a decrease of only $5m, after including a higher foreign exchange and derivative losses of $245m.
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.
