N2.21 Trillion Forex Revaluation Revenue Boosts Government and Banks’ Coffers as Manufacturers Lose N495bn

The foreign exchange revaluation revenue has been a major source of income for the government and the banks in Nigeria, as they raked in about N2.21 trillion from June to August 2023.

This was revealed by the analysis of the Federation Account Allocation Committee communique and the financial statements of five leading Nigerian banks.

The Federation Account Allocation Committee (FAAC) is the body that oversees the distribution of revenue from oil and other sources among the three tiers of government: federal, state and local.

According to the FAAC communique, the Federation earned N834.36 billion as exchange difference revenue between June and August 2023, as a result of the depreciation of the naira against the dollar.

The exchange difference revenue is the amount that accrues to the Federation from the conversion of foreign currency denominated oil and gas royalties, taxes and other income into naira at the prevailing exchange rate.

The FAAC communique showed that in June 2023, the three tiers of government shared N320.89 billion as foreign exchange gain. In July, the amount was N283.9 billion, while in August, it was N229.57 billion.

On the other hand, the five top-tier Nigerian banks, namely First Bank, UBA, Zenith, Access and Guarantee Trust bank, also benefited from the forex revaluation revenue in the first half of 2023.

The forex revaluation revenue is the amount that banks gain or lose from the revaluation of their foreign currency denominated assets and liabilities at the prevailing exchange rate.

The financial statements of the five banks showed that they earned a total of N1.38 trillion from forex revaluation gains in the first half of 2023. FBN gained N16.51 billion, UBA N418.3 billion, Zenith N355.59 billion, Access Bank Holdings N244 billion and GTCO N357.5 billion from forex revaluation revenue in H1 2023.

However, not all sectors of the economy enjoyed the forex revaluation revenue, as some top manufacturers suffered foreign exchange losses of N495.36bn according to their financial statements for H1 2023.

The foreign exchange losses are the amount that manufacturers incur from the increase in their cost of production due to the high cost of importing raw materials and machinery at a higher exchange rate.

The forex revaluation revenue was largely driven by the devaluation of the naira by the Central Bank of Nigeria (CBN) on June 14, 2023, when it directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ market.

This led to a sharp fall in the value of the naira from 471/$ to 755.27/$ as of last week Friday at the Investors & Exporters FX window, according to data from the FMDQ Exchange. The naira also weakened at the parallel market, hitting 985/$ on Friday last week.

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