Dangote’s cement, salt, sugar businesses lose N423 billion to naira crisis

•Operators seek a more stable market to mitigate uncertainty

Dangote Group’s three listed companies – Dangote Sugar Refinery, Dangote Cement and NASCON Allied Industries – reported a combined foreign exchange (FX) loss of N423.3 billion in their 2024 operations.

The figure is a 261.8 per cent rise from N117 billion losses suffered in the previous year. The staggering losses highlight the devastating impact of Nigeria’s volatile FX on corporate earnings, as businesses struggle to absorb the shock of currency depreciation and rising import costs.

For manufacturers and fast-moving consumer goods (FMCG) firms, the FX crisis has been turbulent since early 2023. It has wiped out shareholders’ funds and pushed several companies into severe financial distress.

While Dangote’s listed firms had previously managed to keep their FX losses at a sustainable level in 2023, the steep depreciation of local currency last year, driven by erratic FX supply, inflation and mounting external debt, exposed their vulnerabilities, leading to a significant erosion of profits.

Dangote Sugar Refinery was the worst hit with FX losses soaring to N172.198 billion. This led to a loss before tax of N108.92 billion, a sharp reversal from the N82.3 billion pre-tax profit recorded in 2023. The firm incurred FX losses of N3.4 billion in its 2023 audited financial results.

The sugar manufacturer, which depends heavily on imported raw sugar and other industrial inputs, saw its costs spiral out of control as the naira weakened.
Similarly, Dangote Cement was not spared despite its dominance in the cement industry. The company recorded FX losses of N249 billion from its international operations.

However, its ability to adjust pricing and leverage economies of scale helped it post a net profit of N503.2 billion, a 10 per cent increase from the N455.6 billion profit recorded in 2023.

The cement manufacturing giant suffered FX losses of N113.6 billion in its full 2023 audited financial results. NASCON Plc struggled with FX-related losses, recording N3 billion in the first quarter (Q1) 2024, contributing to a 25 per cent decline in profit after tax (PAT) to N1.2 billion for the quarter.

By the third quarter (Q3), another N1.8 billion FX loss resulted in a 19 per cent drop in PAT to N9 billion. Despite these setbacks, NASCON grew its full-year profit by 14.9 per cent to N23.6 billion, up from N20.5 billion in 2023.

The firm achieved a net FX gain of N228.3 million, a significant improvement from the ₦368.69 million net FX loss recorded in 2022. Industry experts have urged listed firms to intensify strategic hedging mechanisms, including forward contracts and currency swaps, to mitigate future FX losses.

Also, local sourcing of raw materials is seen as a long-term solution to reduce dependence on costly imports. Another key strategy is diversifying export revenue streams to generate foreign exchange earnings directly, thereby reducing reliance on Nigeria’s FX market.

Experts also argued that the Nigerian government has a critical role to play in stabilising the exchange rate and creating an enabling business environment, while the Central Bank of Nigeria (CBN) must ensure a steady supply of FX to manufacturers, shielding them from the unpredictable parallel market.

According to them, a transparent and predictable FX policy would help businesses plan more effectively and reduce the risks associated with sudden devaluations.

President of the New Dimension Shareholders Association of Nigeria, Patrick Ajudua, said manufacturing firms need to accelerate their backward integration projects, expand local farming and refining capacity and strengthen regional operations to reduce FX exposure from cross-border transactions.

Beyond FX stability, he said, the government must address structural economic challenges such as inadequate power supply, port congestion and infrastructure deficits.

These factors significantly inflate operational costs, forcing businesses to rely more on FX for essential imports. Offering tax reliefs and incentives to encourage local production could also help firms cut their FX exposure.

With these measures in place, the Dangote Group and other manufacturing giants can navigate Nigeria’s FX crisis more effectively, ensuring sustainable growth despite ongoing economic turbulence.