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Airtel Africa, will be impacted negatively to the tune of $1.3 billion on its revenues and $740 million on EBITDA, over the next four quarters, due to a currency devaluation in its largest African market, according to MoneyCentral calculations.
Airtel’s income and expenditures denominated in various African currencies are translated into US dollars at the previous periods’ closing exchange rate.
Airtel Africa reported revenues of $5.25 billion and EBITDA, short for earnings before interest, taxes, depreciation and amortization, of $2.575 billion for the year ended 31st March, 2023.
The firm is a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, however Nigeria is its largest market on the continent.
A currency devaluation sensitivity analysis was disclosed by Airtel 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 $22m on revenues, $12m on EBITDA and $7m on finance costs (excluding derivatives) on a 12- month basis.
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 naira has depreciated against the US dollar in the I&E window by about 62% to N756 per dollar.
The weighted average exchange rate used in Airtel Africa’s profit and loss statement for the 12 months ended 31 March 2023 was approximately N440 /USD, and the rate used to prepare the balance sheet as of 31 March 2023 was N461.4/USD.
Additionally, the direct impact of 1% devaluation in the Nigerian naira on derivative instruments held by the Airtel Group would have a negative impact of approximately $1.5m, according to the firm.
“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 and help to alleviate the challenges faced in the last few years to access US dollars in the market,” Airtel said.