Dangote Sugar Refinery Plc, a sweetener producing company in Nigeria, said actual foreign exchange losses in 2022 were higher than those reported regarding international accounting rules using the official naira exchange rate, according to Bloomberg.
The company — owned by Aliko Dangote, Africa’s richest man — reported N1.3 billion ($2.8 million) in foreign-exchange losses in the year through December, when it posted results based on International Financial Reporting Standards. That’s lower than the N14.3 billion posted for the first three quarters when it was reported on the basis of a blended or average cost of obtaining dollars during the period.
“In the third quarter we were using a blended rate because the cost of sourcing foreign exchange internally was quite high,” Oscar Mbeche, chief finance officer at Dangote Sugar, said at an investor conference call in Lagos. “For the year-end, we are obliged to account for foreign exchange using IFRS, which limits us to the official rate and doesn’t allow the use of blended rate.”
Africa’s largest economy has multiple exchange rates with a tightly controlled price for official transactions. The Central Bank of Nigeria rations dollars at the official rate, causing shortages that prompt most firms to buy foreign currencies in the unauthorized market where the naira is 65% weaker. Companies use the so-called blended rate in reporting to present a more accurate picture of forex gains or losses.
Using the official rate for IFRS reporting helped trim finance costs for the sugar producer, boosting its earnings. Full-year profit after tax more than doubled to N54.7 billion.
Nigeria’s foreign-exchange reserves are near an 18-month low at $36.7 billion. The tight control over dollars has made it difficult for companies to repatriate earnings. Foreign airlines have about $744 million stuck in the West African nation, Punch newspaper reported, citing a letter written by International Air Transport Association. Emirates Airlines stopped flying to the country in August.
Aliko Dangote has assets valued at $19.6 billion, according to Bloomberg Billionaires Index. (Bloomberg)