Airtel Africa to suffer over $22m loss to naira devaluation

Airtel Africa has said the devaluation of the naira will affect the revenue of the company in 2023, a statement released by the network provider on Tuesday disclosed.

Ripples Nigeria previously reported last week Wednesday that the Central Bank of Nigeria (CBN) unified the multiple foreign exchange rates.

This led to the devaluation of the naira from N464/$1 last week Tuesday to N770/$1 as of Monday. The increase has been projected to impact companies operating in Nigeria.

Prior to devaluation, Airtel Nigeria had stated that a 1% devaluation of the naira will result in a negative impact of $22 million on revenues, $12 million on EBITDA and $7 million on finance costs (excluding derivatives) on a 12-month basis.

“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,” the company said in the statement.

However, the value of the naira has now dropped by 65.9% or N306 in the last one week, which means the impact will be more significant than initially projected by Airtel.

Despite the expected impact, Airtel said it welcomes the decision to unify the multiple exchange rates, as it will alleviate the scarcity challenges faced in accessing dollars.

The statement reads: “As a result of the CBN decision, the US dollar has appreciated against the naira in the I&E window. Airtel Africa welcomes these changes as a positive move towards a more stable Nigerian FX market.

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“A currency devaluation sensitivity analysis was disclosed in the recent results for the financial year 2022/23, highlighting that 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.

“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.

“The USD component of operating costs within the Nigerian business is minimal and, therefore, we do not anticipate a material impact on the EBITDA margin.

“The market expectation is 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.

“Airtel Nigeria is Airtel Africa’s largest market, with significant growth potential driven by an underpenetrated market, population growth and strong demand for digital and financial services. In our recently reported results for the financial year 2022/23, the customer base increased by 9%, with 4G data customers increasing by 27.6%. This, combined with continued ARPU expansion drove Nigerian constant currency growth of 20.3% in revenues and 11.1% in EBITDA. This strong performance has been sustained over many years with five-year CAGR revenue and EBITDA growth of 23.9% and 29.5% in constant currency, respectively.

“The Group continues to invest in Nigeria to enable it to capture this growth opportunity. This continued investment will facilitate growth, drive continued digitalisation across the country, facilitate economic progress and transform lives across Nigeria.”

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