Free-trading naira effects
Nigeria is letting its currency, the naira, trade freely from 27 June; expectations are that it will see significant weakness on the day. Locally, the immediate implication is that the MTN fine will likely be cheaper as it is priced in naira. However, longer term, a weaker naira means that profits, when converted back to rand, will be smaller and this is going to hit a wide range of local companies that do business in the country. MTN will likely take the biggest hit as Nigeria is its largest profit generator at ebitda (earnings before interest, taxation, depreciation and amortisation) level, with just over 35% of revenue coming from Nigeria. But Nampak, Shoprite and others will also see lower profits when converted back to rand. A quick look at Shoprite shows that about 14% of revenue is from non-RSA outlets and Nigeria is about 10% of that figure. So any dent to Shoprite profits should be modest.
Longer term, a weaker naira means that profits, when converted back to rand, will be smaller.