Fakoyejo OlalekanThe naira devaluation will significantly impact the revenue of Airtel Africa in 2023, with the company projecting a $22 million loss in revenues should the naira devalue by 1%.
However, the naira depreciated by 65.9% to N770/$1, from N464/$1 last week Tuesday, the day before the Central Bank of Nigeria (CBN) unified the multiple exchange rates. This means the dollar rate rose by N306.
Airtel Africa had projected a $22 million loss on the basis of the dollar trading between N440/$1 and N461.4/$1 in the first quarter of this year.
In a statement on Tuesday informing its shareholders and the general capital market about the impact of the recent devaluation, Airtel Africa said: “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.
“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.”
While noting that the devaluation will impact on its turnover, the network provider said the foreign exchange policy by President Bola Tinubu will provide greater US dollar liquidity after struggling with scarcity for years.
Airtel Africa said this won’t stop investment in the Nigerian market, rather, the firm will continue to invest to capture growth opportunities in the country.
“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,” Airtel Africa said in the statement.
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