Airtel Africa has lauded the recent moves by Nigeria to end its system of multiple exchange rates, as it sees this as a step towards a more stable Nigerian FX market. The Nigerian Central Bank allowed the Naira to slide to a record low last week as it started the process of lifting currency controls that have affected Africa's largest economy for years. A new policy realigning several market exchange rates is expected to provide better dollar liquidity and help remove obstacles to accessing the currency.
Airtel Africa in a stock exchange filing in Lagos on Tuesday expressed its support for these changes. However, there are potential drawbacks, as the devaluation of the naira could negatively impact earnings for the telecommunications company in its most significant market. The firm declared in its 2023-2023 financial year results that a 1% devaluation of the naira would cause a $22 million revenue loss on a 12-month basis and affect $12 million on EBITDA.
Despite the potential risk, Airtel Africa still remains optimistic about Nigeria's growth potential. The country's under-penetrated market and vast population with strong demands for digital and financial services have positioned it as a target market for expansion. Therefore, Airtel Africa, looking to expand its services, has committed an additional $700 million in the next two to three years to Nigeria, its most significant market. In Nigeria, Airtel Africa has 60 million subscribers and 27% of market share. The investment will facilitate the company's plan to accelerate the roll-out of its 5G network service.
Nigeria has operated a system of multiple exchange rates, including a tightly-controlled and illiquid official rate which forced many firms to use a parallel market that was about 60% more expensive. Even so, companies had to prepare their financial reports at the official rate despite only using it in a fraction of their transactions. The market hopes that the realignment of exchange rates will reduce the need for parallel exchange markets and make the system more stable, thus improving the country's business and economic climate.
In conclusion, Airtel Africa applauds Nigeria's decision to end its system of multiple exchange rates and sees it as a step towards a more stable foreign exchange market. The investment the company made in Nigeria highlights the company's commitment to growth and expansion in an under-penetrated market with high demand for innovative digital services.