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NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 29.4 Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (Note 29.5.1) and interest rates (Note 29.7.1). 29.5 Foreign currency risk management The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Income is primarily earned in local currency for most of the locations with a significant portion of capital expenditure being in foreign currency. The Group manages foreign currency by monitoring our financial position in each country we operate with the aim of having assets and liabilities denominated in the functional currency as much as possible. The carrying amounts of the Group and Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows. Group Liabilities Assets US Dollars 31-Dec-16 31-Dec-15 ₦’million 150,791 ₦’million 51,728 31-Dec-16 31-Dec-15 ₦’million 15,618 Company Liabilities Assets US Dollars 31-Dec-16 31-Dec-15 ₦’million 120,004 ₦’million 49,645 31-Dec-16 31-Dec-15 ₦’million 622,832 ₦’million 390,580 29.5.1 Foreign currency sensitivity analysis The Group is mainly exposed to US Dollars. The following table details the Group and Company’s sensitivity to a 35% (2015: 15%) increase and decrease in the Naira against the US Dollar. 35% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 35% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in profit or equity for a 35% change in the exchange rates. A negative number below indicates a decrease in profit or equity for a 35% change in the exchange rates. Group Effect on Profit or loss/Equity for a 35% (2015:15%) appreciation Effect on Profit or loss/Equity for a 35% (2015:15%) depreciation 33,117 5,263 Company 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 ₦’million ₦’million ₦’million ₦’million (123,193) 123,193 (33,117) (5,263) (35,798) 35,798 This is mainly attributable to the exposure outstanding on US dollar receivables and payables at the end of the reporting period. 29.6 Credit risk management Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. 206 Annual Report 2016 ₦’million 1,606

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