Airtel Africa Plc applauded moves by Nigeria to end its system of multiple exchange rates, even as the devaluation of the naira threatens to hit earnings for the telecommunications firm in its biggest market.
(Bloomberg) — Airtel Africa Plc applauded moves by Nigeria to end its system of multiple exchange rates, even as the devaluation of the naira threatens to hit earnings for the telecommunications firm in its biggest market.
“Airtel Africa welcomes these changes as a positive move towards a more stable Nigerian FX market,” the company said in a stock exchange filing in Lagos on Tuesday.
Nigeria’s central bank allowed the naira slide to a record low last week as it started a process to remove currency controls that have distorted Africa’s biggest economy for years. The market expects that a new policy with the realignment of the several market exchange rates used previously will provide greater dollar liquidity and help remove obstacles to accessing the greenback, Airtel Africa said.
The firm said a sensitivity analysis disclosed in its 2023-2023 financial year results showed that a 1% devaluation of the naira would result in a $22 million hit to revenue on a 12-month basis and a negative impact of $12 million on Ebitda.
The naira weakened to 770.38 to the dollar at the close of trade on Monday in the investors and exporters window, the reference rate for the currency, after the central bank began steps on June 14 to phase out the currency controls.
The weighted-average exchange rate used to prepare its 12-month profit and loss statement for the period ended March 31 was of 440 naira to the dollar, Airtel Africa said.
Parallel Market
Nigeria has operated a system of multiple exchange rates including a tightly-controlled and illiquid official rate which forced many firms to use a parallel market which was about 60% more expensive. Even so, firms had to prepare their financial reports at the official rate despite using it in only a fraction of their transactions.
Airtel Africa, with operations in 14 African countries, is looking to spend an additional $700 million in the next two to three years to expand its services in Nigeria, its biggest market, where it has 60 million subscribers and 27% market share. The investment will help the company accelerate the roll-out of 5G network service.
The wireless operator remains optimistic about Nigeria’s growth potential because of its under-penetrated market, population growth and strong demand for digital and financial services, it said. “The Group continues to invest in Nigeria to enable it to capture this growth opportunity.”
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