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Last week, the All Share Index closed with a whopping 7.4% as stocks rallied on the back of the new flexible exchange rate policy announced  by the Central Bank of Nigeria and expected to commence on Monday June 20th 2016.

Stocks rallied, particularly banking stocks as investors fell over each other trying to take position in anticipation of an influx of cash from FPI’s. It was quite understandable considering how downbeat stocks had been for the first quarter of this year. Nevertheless, investors still had to rely on some fundamentals to decide which stock to buy.

We came across a report from one of Nigeria’s leading Pension Fund Asset Managers, ARM, which shed more light into what drove investor sentiments last week and what could happen this week. The report reviewed the new policy and its potential impact on stocks in some select industries. These were the key highlights (and we bet it’s still relevant this week).


  • The analysed companies to determine the most exposed to naira weakening and dimension potential impact on 2016F PBT.
  • They also tested for impact of 30% and 50% naira depreciation on PBT.
  • Their report concluded that on a sectoral basis the banking and oil and gas sectors had net foreign assets, while consumer goods, agriculture and building materials sectors each have net foreign liabilities.

Banking sector

  • For banks, looking through net FCY position of our universe, Access stands out with net foreign liability of N174 billion as at FY 2015.
  • Access bank could therefore report forex exchange revaluation losses of up to N70 billion2, 30%
  •  GTB, FBNH and Zenith hold the largest net foreign asset, impact of a naira depreciation on 2016F PBT is most positive for FCMB (nearly 4x) and Fidelity (2.3x).

Oil and Gas Sector

  • In the oil and gas sector, a depreciation of the naira is most positive for Total and Mobil with net foreign assets of N7.8 billion and N3.3 billion respectively while MRS is at the most of risk of reporting a sizeable foreign loss, with net foreign liability of N23 billion.
  • At base case, potential foreign currency gains for Total (N3.2 billion) and Mobil (N1.3 billion) translate to 25% and 13% of 2016F PBT, with loss for MRS of up to 3x 2016F PBT (est. N9.4 billion). Unsurprisingly, Seplat with largely dollar receivable also stands to benefit to the tune of N1.3 billion.

Cement Sector

  • In the cement sector, Dangcem and Lafarge appear the most exposed to foreign currency risk given their respective net foreign currency liability position of N25 billion (or ~4% of FY 15 Equity) and N4billion (2% of FY 15 Equity) while CCNN, whose operations are Nigeria-centric, have no reported foreign currency liability position.
  • Estimate losses of Dangcem and Lafarge are both 5% of 2016F PBT.

Consumer Goods

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  • Dangote Flour Mills Unilever and Nestle as having the highest risk of foreign exchange losses of at least 40% of our 2016F PBT.
  • On the other hand, UACN and PZ sit in a fairly comfortable position with net FX asset of N56.1 million and negligible net FX liability, respectively.
  • For the agriculture players, Okomu is at risk of a bigger forex loss (N660 million) relative to Presco (N365million) with respective 25% and 6% impact on 2016F PBT.

Get the full report 

Download (PDF, 778KB)

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  1. The forex position used for the analysis was as at FY 15. I am sure we are aware that some companies forex position changed significantly as from Q1 2016 because of some deals done in 2015.


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