June 17 (Lagos) - On Monday, 20th June 2016, Nigeria will float the Naira for the first time in nearly three decades. Though there will be no official target under the new market structure, analysts at Asset & Resource Management ltd in Ikoyi expect depreciation of up to 40% to N280 to 1 US Dollar.
With most corporates having some level of foreign currency exposure, using net foreign exchange position as at FY 15, analysts have reviewed their coverage names to determine the most exposed to Naira weakening and dimension potential impact on 2016F Profit Before Tax.
For banks, looking through net FCY position of our universe, Access stands out with net foreign liability of N174 billion as at FY 2015. Using base scenario (40% depreciation), Access bank ( ACCESS
) could report forex exchange revaluation losses of up to N 70 billion, 30% more than previously expected by the analysts mentioned above for 2016F Profit before tax.
On the flip side, although GTB ( GUARANTY
), First Bank ( FBNH
) and Zenith ( ZENITHBANK
) hold the largest net foreign asset, impact of a Naira depreciation on 2016 Profit Before Tax is most positive for FCMB
(nearly 4x) and Fidelity ( FIDELITYBK
)(2.3x) according to analysts at Asset & Resource Management Ltd in Ikoyi.
In the oil and gas sector, a depreciation of the Naira is most positive for TOTAL
with net foreign assets of N7.8 billion and N3.3 billion respectively while MRS
is at the most of risk of reporting a sizeable foreign loss, with net foreign liability of N23 billion.