- Airtel Africa welcomes the changes to the Nigerian foreign exchange market, which it believes will help to alleviate the challenges faced in recent years to access US dollars.
- The company notes that the market expectation is that the new foreign currency policy and subsequent realignment of the several market exchange rates will provide greater US dollar liquidity.
- The Group continues to invest in Nigeria to enable it to capture the growth opportunity in the market.
Airtel Africa Plc has said that changes to the foreign exchange market in Nigeria will help to alleviate the challenges faced in the last few years to access US dollars in the market.
The provider of telecommunications and mobile money services stated this in a regulatory notice to the Nigerian Exchange Limited and seen by Nairametrics.
US dollar liquidity
The company noted that the market expectation is that the new foreign currency policy and subsequent realignment of the several market exchange rates will provide greater US dollar liquidity.
- “Airtel Africa notes that the Central Bank of Nigeria (CBN) has announced changes to the operations in the Nigerian Foreign Exchange (FX) Market, including the abolishment of segmentation, with all segments now collapsing into the Investors and Exporters (I&E) window and the reintroduction of the ‘Willing Buyer, Willing Seller’ model at the I&E window.
- As a result of the CBN decision, the US dollar has appreciated against the naira in the I&E window. Airtel Africa welcomes these changes as a positive move towards a more stable Nigerian FX market,” the company said.
Currency devaluation sensitivity
The statement signed by Simon O’Hara, Group Company Secretary explained that a currency devaluation sensitivity analysis was disclosed in the recent results for the financial year 2022/23, highlighting that a 1% devaluation in the Nigerian naira would have a negative impact of $22 million on revenues, $12 million on EBITDA and $7 million on finance costs (excluding derivatives) on a 12- month basis.
- “Additionally, the direct impact of 1% devaluation in the Nigerian naira on derivative instruments held by the Group would have a negative impact of approximately $1.5 million.
- The weighted average exchange rate used in the profit and loss statement for the 12 months ended 31 March 2023 was approximately 440 NGN/USD, and the rate used to prepare the balance sheet as of 31 March 2023 was 461.4 NGN/USD.
- The USD component of operating costs within the Nigerian business is minimal and, therefore, we do not anticipate a material impact on the EBITDA margin,” the company said.
Growth potential
According to the statement, Airtel Nigeria is Airtel Africa’s largest market, with significant growth potential driven by an underpenetrated market, population growth, and strong demand for digital and financial services.
- “In our recently reported results for the financial year 2022/23, the customer base increased by 9%, with 4G data customers increasing by 27.6%.
- This, combined with continued ARPU expansion drove Nigerian constant currency growth of 20.3% in revenues and 11.1% in EBITDA.
- This strong performance has been sustained over many years with five-year CAGR revenue and EBITDA growth of 23.9% and 29.5% in constant currency, respectively. The Group continues to invest in Nigeria to enable it to capture this growth opportunity.
- This continued investment will facilitate growth, drive continued digitalization across the country, facilitate economic progress, and transform lives across Nigeria,” the company said.