• Companies urged to convert debts to equities for long-term survival
• Consumers struggle to catch up with rising prices
Nigerian companies with gaping foreign exchange (FX) holes in their books have adopted price adjustments and gouging in some cases, to repair balance sheets and survive the economic hardship, 2024 and quarter one financial data have shown.
The price hike option, which is like another tax on the citizens, has worsened the economic strain on consumers already battling record-high inflation and shrinking purchasing power. This has raised concerns about affordability and the possibility of more citizens falling deeper into poverty.
Over the last year, prices of food, telecom services and other essential goods have surged by between 30 per cent and 100 per cent or more as businesses scramble to recover from currency-related losses suffered in 2023 and early 2024.
While some firms have navigated the turbulent waters and returned to profitability, others remain deeply distressed with price hikes unable to bridge the gap.
The analysis also suggests that some companies could struggle for several years to put the consequences of the FX liabilities behind them and clean their books.
Apart from aggressive price adjustments, the prolonged naira volatility has forced companies to make tough financial decisions, including debt restructuring, equity dilution and aggressive price adjustments.
But generally, the product and service re-costing strategy adopted since last year has helped companies to offset foreign exchange losses and cushion the impact of inflation.
Similarly, the spike in the cost of raw materials, energy and logistics has pushed firms to the edge, leaving them with little option than to adjust prices to hedge their losses and remain in business.
Operators warn that without proactive hedging strategies such as forward contracts and currency swaps, Nigerian companies will remain vulnerable to FX volatility.
Many firms were caught off guard by the naira’s rapid depreciation in 2023 and 2024, eroding shareholder value and pushing some businesses into negative equity positions.
With interest rates still high and inflation squeezing consumer incomes, the ability of businesses to continuously pass costs to customers is unsustainable.
The Nigerian corporate landscape has been reshaped by the FX crisis, with some firms emerging stronger while others struggle to survive.
The resilience of businesses will depend on their ability to adapt, hedge risks, and balance pricing strategies without alienating already burdened consumers.
If the naira stabilises and companies execute strategic financial management, 2025 could mark a turning point. But if currency volatility persists, more companies could be pushed into distress, further straining the economy.
While price hikes remain the primary survival tool for now, Nigerian consumers obviously can no longer keep up with the relentless rise in costs.
Managing Director of Arthur Steven Asset Management Limited, Tunde Amolegbe, explained that FX losses are inevitable for companies reliant on imported raw materials or services in an environment where the exchange rate remains volatile.
According to him, the medium-term solution lies in import substitution and significant backward integration.
However, he argued that these companies might find some relief by sourcing FX-related raw materials and services through their parent firms at more favourable terms in the short term.
President of Highcap Securities, David Adonri, noted that some companies have started to recover from the severe FX losses they suffered when the naira was floated despite the initial setbacks.
He added that major firms such as Nestlé, MTN, Guinness, and Cadbury returned to profitability in the fourth quarter of 2024, raising hopes that they could soon exit their loss positions.
President of the New Dimension Shareholders Association of Nigeria, Patrick Ajudua said the impact of the forex crisis has been particularly pronounced for companies that are heavily import-dependent or have significant contractual obligations in foreign currency.
Ajudua suggested that companies should mitigate further losses by adopting a debt-to-equity conversion, where major shareholders absorb outstanding FX debts in exchange for equity.
According to him, while this would dilute the holdings of other shareholders, it could help clean up balance sheets, create liquidity space, and improve credit ratings, making companies more attractive to investors.
He said another viable solution is reducing dependence on imported raw materials by sourcing locally, a move that would shield companies from exchange rate volatility.
Additionally, he argued that boosting exports could provide an alternative stream of foreign exchange earnings and help companies hedge against currency risks.
He also stated that companies’ efforts to convert dollar-denominated liabilities to naira could prevent unnecessary exposure to fluctuating exchange rates, ensuring more financial stability.
With these strategies in place, Nigerian firms are expected to stabilise gradually. However, the rising cost of goods and services continues to impact consumer affordability.
Nestlé Nigeria, for instance, increased the price of its core products by as much as 100 per cent since last year. The 1kg tin of Milo, previously sold for around N2,800 has been increasing by 96.4 per cent to N5,500, reflecting a 96.4 per cent jump.
Nescafé Classic Tin doubled in price, moving from N2,500 to N5,000, a 100 per cent increase. Maggi Star Seasoning 100 cubes, previously popular for their affordability, also rose from N530 to N900 or a 70 per cent hike.
Nigerian Breweries equally implemented steep price hikes. Star Lager Beer (60cl) rose from N625 to N850, marking a 36 per cent increase, while Heineken (60cl) jumped from N800 to N1,300, a 62.5 per cent rise.
Legend Stout (60cl) climbed from N750 to N1,250, translating to a 66.7 per cent increase.
Guinness Nigeria’s large stout bottle rose to N1,300, up from N700, leading to a 85.7 per cent increase while the smaller variant saw its price rise from N500 to between N850, representing a 60 per cent to 80 per cent increase.
Nigeria has also seen UAC’s Gala sausage rolls adjusted significantly. Classic Gala, previously N70, now sells for N91, a 30 per cent increase. Mega Gala rose from N100 to N156, reflecting a 56 per cent jump, while Spicy Gala increased from N100 to N195, marking a 95 per cent rise.
Gala Classic/Spicy x26 also rose from N2,420 in 2024 to N6,500 this year representing approximately 168 per cent increase in price.
Cadbury Nigeria, a company that was also hit by the FX crisis in 2023, also implemented price hikes, with its Dairy Milk 55g chocolate bar rising from an estimated N1,700 to N3,312 – an 89 per cent increase.
As companies continue to adopt measures to navigate the FX crisis, consumers remain at the receiving end of the burden, with their income seriously impacted, which sees some spending 100 per cent of their income on basic consumption.
Helped by price adjustment, Nestlé Nigeria, which posted N36.4 billion loss in Q4 2023, made a dramatic turnaround in Q4 2024 and reported an N19.7 billion profit. This was buoyed by a 95 per cent revenue surge, leading to a 77.1 per cent rise in operating profit.
A key factor in Nestlé’s resurgence was the full repayment of its $20 million inter-group FX debt, a major financial burden in previous quarters.
The implementation of significant price increases across its product portfolio also helps to counteract rising costs and foreign exchange pressures.
With no additional FX losses, the company is on track for a strong 2025 performance, though analysts suggest its accumulated losses from 2023 and 2024 could take two years to fully clear before dividend payments resume.
In the third quarter of 2024, the company raised prices by approximately 31.3 per cent compared to the previous quarter.
Earlier, in the second quarter of 2024, average prices in the food and beverage segments increased by 12.6 per cent and 15.3 per cent year-on-year, respectively.
Telecom giant, MTN Nigeria also staged an impressive recovery, reducing its pre-tax loss from N700 billion as of Q3 2024 to N400 billion by year-end – a N300 billion rebound in just one quarter.
The company fully repaid its FX obligations and implemented a 50 per cent increase in telecom tariffs last quarter, significantly boosting revenue streams.
With the changes, MTN is on track to post record-breaking profits in 2025. Analysts predict that 2025 earnings could be strong enough to erase the entirety of MTN’s 2023 and 2024 losses, reinforcing investor confidence.
MTN Nigeria extended its profitability streak into Q1 2025, reporting a profit after tax of N133.7 billion, backed by a pre-tax profit of N202.6 billion, marking its second consecutive quarter of strong earnings after posting N163.3 billion in pre-tax profit in Q4 2024.
Other companies took alternative approaches to managing their FX burdens. Cadbury Nigeria and PZ Cussons adopted debt-for-equity swaps, issuing new shares to their parent companies in exchange for debt relief.
This strategy freed up capital and provided financial breathing room. However, it diluted shareholders’ earnings, a move that may take time to regain investor trust.
Cadbury returned to profitability in Q1, 2025 while PZ Cussons may need another year to fully recover. Both firms have also increased product prices to bolster revenue, though weak consumer spending remains a significant challenge.
The brewing sector, heavily impacted by FX losses, also relied on steep price hikes to offset rising costs. Nigerian Breweries, Guinness Nigeria, and International Breweries all adjusted their pricing strategies.
Nigerian Breweries and International Breweries raised capital through rights issues, likely converting FX debts into equity to stabilise operations. Guinness Nigeria underwent a major ownership shift as Diageo exited by selling its stake to a new investor.
The sector’s outlook remains uncertain, but Guinness Nigeria’s Q2 2025 financial statement signals a potential return to profitability, driven by cost-cutting measures and price adjustments.
Further investigation revealed that NB announced an initial price hike effective from February 19, 2024, citing the need to counterbalance escalating input costs.
Also, a subsequent increase took effect on March 15, 2024, as part of ongoing efforts to address continuous cost pressures. A third price adjustment was implemented on April 9, 2024, reflecting the company’s strategy to manage persistent economic challenges.
By adopting strategic pricing and other proactive measures, the firm successfully wiped out its FX debt, significantly reducing its vulnerability to currency fluctuations.
Dangote Sugar Refinery suffered one of the biggest FX losses, reaching N172.2 billion, and leading to a pre-tax loss of N108.92 billion, a stark contrast to its N82.3 billion profit in 2023.
The sugar manufacturer, heavily reliant on imported raw materials, has seen its production costs spiral due to the naira’s depreciation. Experts estimate that recovery could take at least three years unless the currency stabilises.
Also, Dangote Cement faced significant FX headwinds, with N249 billion in losses from international operations. However, its ability to adjust pricing and leverage economies of scale helped it post a N503.2 billion net profit in 2024, a 10 per cent increase from 2023. Despite this, analysts believe it will take another two years for the firm to fully clear its FX losses.
For instance, Dangote Cement reported a strong 101 per cent year-on-year surge in gross turnover to N817.35 billion in Q1 2024, up from N406.7 billion in Q1 2023, according to its unaudited financial statements.
However, despite the impressive revenue growth, pre-tax profit grew by a more modest 13.3 per cent to N166.4 billion from N146.8 billion recorded in Q1 2023. Profit after tax rose even more slowly, inching up by just 3 per cent year-on-year to N112.7 billion.
The company’s bottom line was significantly impacted by a steep rise in net foreign exchange losses, which soared by 551 per cent to N63.8 billion, compared to N9.8 billion in the same period last year.
Also, NASCON posted N3 billion in FX losses in Q1, 2024, leading to a 25 per cent decline in profit after tax. However, it managed to grow full-year profit by 14.9 per cent to N23.6 billion, aided by price adjustments.
BUA Foods absorbed N188 billion in FX losses in 2024, yet its profit soared 167 per cent to N289 billion. The company leveraged its market strength to sustain profitability. BUA Cement saw N6.9 billion in FX losses, but its profit still rose to N99.6 billion, a jump from N73 billion in 2023.
Beta Glass also grew its profit from N62.9 billion in 2023 to N117.9 billion, despite absorbing a N2 billion FX loss. MRS Oil also recorded a N9.7 billion profit in 2024, up from N5.9 billion, while managing N1.2 billion FX loss.
The ability of businesses to maintain price stability will depend on currency trends, monetary policies, and broader economic conditions.
For now, price increases remain the primary strategy for companies navigating FX losses, an option that leaves much financial strain on households.
