MultiChoice Group extracted USD91m from Nigeria in the six months ended 30 September 2023 (H1, 2024), and halted the use of futures contracts to hedge its foreign currency exposure to the country, due to losses on the contracts.
“As the gap between the official and parallel naira rates narrowed following the material depreciation in the official naira rate during the reporting period…. the group extracted USD91m from Nigeria in the period, at an average rate of NGN794: USD (1H FY23: NGN634: USD), incurring extraction losses of USD28m (ZAR0.5bn) in the process,” MultiChoice said in its latest financial statement released yesterday, seen by MoneyCentral.
After incurring losses of ZAR44m in the half year period of last financial year, related to fair-value movements on Nigeria futures contracts, the group discontinued the use of Nigerian futures contracts during FY23.
“MultiChoice stopped Margin deposits on Nigerian futures hedging instruments that are not highly liquid and have maturities of greater than three months on initial recognition. During FY23, all margin deposits matured,” the firm said.
The Central Bank of Nigeria (CBN) recently cleared matured foreign-exchange (FX) forward contracts with an unspecified number of banks, according to spokesman Isa Abdulmumin.
The amount of overdue forward payments was estimated at about $6.7 billion, according to government officials.
That backlog had weighed on the naira, which fell to a record low of almost 1,000 per dollar on the official market last week.
Other insights from MultiChoice earnings report
Nigeria is the MultiChoice’s largest market in the Rest of Africa segment and the popular reality series Big Brother Naija which entered its eighth season, delivered record advertising revenues in local currency for MultiChoice.
Nigeria tax dispute
The group has two ongoing Nigerian tax matters, one involving MultiChoice Nigeria Limited and the second involving MultiChoice Africa Holdings B.V.
On 16 February 2022, an agreement was reached with the Federal Inland Revenue Service (FIRS) that legal proceedings will be stayed and that an integrated tax audit will commence for both entities.
The audit process, which covers corporate income tax, value added tax and transfer pricing is ongoing, but has taken longer than initially anticipated.
As part of the process, the group made total deposits of ZAR1.3bn up to FY23 on a good faith and without prejudice basis (no further payments were made during the period). The deposits have been recorded as current receivables pending the outcome of the audit process.
Losses related to Nigeria’s FX regime
MultiChoice reported higher non-quasi equity foreign exchange losses on the intergroup loans with MultiChoice Nigeria Limited.
This follows the depreciation of the NGN against the USD from a closing rate of NGN464.50 in FY23 to NGN789.50 in 1H FY24.
Losses were also reported on cash remittances, due to differences between the Nigerian I&E rate used by the group for translation and the Nigerian parallel rate at which cash has been remitted.
The group achieved an average remittance rate of NGN794: USD (1H FY23: NGN634: USD) during 1H FY24.