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Airtel Africa to lose over $22 million due to the depreciation of the naira!

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Airtel Africa, a network provider said in a statement, on Tuesday, that the depreciation of the naira will have a huge impact on the company’s revenue in 2023. 

As a result, the naira was devalued from N464 to $1 on Tuesday of last week to N770 to $1 as of Monday. The increase is expected to have an effect on Nigerian businesses.

Airtel Nigeria had previously stated that a 1% devaluation of the naira would have a negative impact on revenues of $22 million, EBITDA of $12 million, and finance costs (excluding derivatives) of $7 million over the course of a year.

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.

However, the worth of the naira has now decreased by 65.9%, or N306, over the past week, indicating that the impact will be greater than what Airtel had originally anticipated.

Despite the anticipated effects, Airtel said it supports the decision to combine the various exchange rates because it will make it easier to access dollars despite their scarcity.

“Due to the CBN decision, the US dollar has strengthened against the naira in the I&E window,” the statement reads. “These modifications are welcomed by Airtel Africa as a step in the right direction for a more stable Nigeria FX market”.

The statement further read: “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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