Nigeria's banks have been cashing in on the devaluation of the Nigerian naira that forced some of the country's largest companies revalue overseas loans and letters of credit (L/Cs)

But while banks enjoy windfalls engineered by the Nigerian government, the revaluations have triggered significant losses amongst companies involved in international trade.

Perils of international trade

Revaluation of 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 (N184.8 billion - 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 (DC World News, 2 August 2023).

Six of Nigeria's largest companies meanwhile jointly declared a combined loss of US$385 million after revaluing their overseas loans and L/Cs.

Windfall profits

But Guaranty Trust Holding, the parent company of Guaranty Trust Bank exceeded all forecasts by revealing a US$468 million windfall in the period ending 30 from its foreign exchange holdings.

Fidelity Bank meanwhile reported its 2023 second-quarter results showing pre-tax profits grew by 184 per cent year-on-year reach N43.58 billion, substantially due to the dramatic weakening of the naira by the Nigerian authorities. Half year profits in Stanbic IBTC Holdings climbed by 121.5 per cent, buoyed by foreign exchange gains.

Essentially, the devaluation has favoured financial institutions with substantial overseas assets, while manufacturers have grappled with losses attributed to foreign currency-denominated loans.

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