Revaluation of letters of credit (L/Cs) and foreign vendor balances due to the devaluation of Nigeria's currency against the US dollar have precipitated losses of 184.8 billion Nigerian naira (N184.8billion - US$940 million) at the cement and sugar companies in the Dangote Group, West Africa's largest conglomerate and one of the largest on the African continent.

The loss reflects difficulties African countries are finding obtainingor affording hard currencies to buy imports and make payments in the world's post-pandemic economy that featuressupply chain problems, spiralling prices of raw materials, sharply lower prices for Africa's key exports and severely depressed tourism revenues across the continent.

The result of these and other features is weaker domestic currencies and foreign exchange shortages in many African countries.

Naira devaluation

Dangote's loss was recorded in the second quarter of 2023 in the wake of the Central Bank of Nigeria's14 June 2023 devaluation of the naira by N192.4 or 40.8 per cent.

The naira exchanged against the US dollar at the rate of N471.7/US$1 on 13 June, but following the devaluation the next day, the exchange rate moved to N664/US$1.

Financial statements

Dangote Cement recorded a net exchange loss of N116.1 billion due to the naira devaluation and Dangote Sugar saw a loss of N68.7 billion.

Monetary assets and liabilities for the Nigeria operations were revalued at Dangote Sugar resulting in a revaluation loss of N68.7billion for the company "mainly driven by L/Cs and foreign vendor balances", according to the company's financial statement for the period ended 30 June 2023.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.