The devaluation of the naira – agreed in principle by the Central Bank of Nigeria in May – will hit Nigerian producers’ revenues, Bernstein warns. The decision to revalue marks a reversal of course by the government, which had for some time faced calls to allow the currency to depreciate.
Bernstein’s analysis focusses mainly on the implications for LafargeHolcim as the only major with a significant presence in Nigeria. It concludes that the company – already facing pressure from a 20 per cent fall in prices – could see Nigerian EBITDA decline from CHF335m (US$349m) in 2014 to just CHF169m (US$176m) this year.
This estimate is predicated on the value of the naira falling to NGN275 per US dollar, from the official rate of NGN199 today.
As the major producer in Nigeria, Dangote has by far the largest exposure to the effects of a devaluation. At his company’s AGM in April this year, Aliko Dangote said: “We have good strategy in place, the volatility of the foreign exchange will not affect our operations. I am not an advocate of devaluation of our currency, even if that had happened; it would not have affected your company”.
