Federal Palace Hotel reports N31.6bn loss for 2023

By Merit Ibe     

Tourist Company of Nigeria Plc, owners of the Federal Palace Hotel, reported a staggering pre-tax loss of N31.6 billion for the financial year ending December 2023. This marks a 900% increase from the previous year’s pre-tax loss of N3.2 billion, leading to a negative equity of N7.8 billion and effectively wiping out shareholders’ funds.

The primary driver behind these losses was a significant N30.3 billion hit from foreign exchange losses, primarily due to foreign currency loans amounting to $67.7 million. The breakdown of these loans includes $22.1 million owed to Ikeja Hotel, $23.8 million to Sun Hotel, and $21.7 million to Omamo Investment Ltd, though the loans to Omamo Investment Ltd are currently under dispute.

Despite the financial turmoil, Federal Palace Hotel’s hospitality business generated N2.93 billion in 2023, a 25% increase from the N2.36 billion earned in 2022. However, the cost of sales on food and beverages decreased by 24%, falling to N215 million from N281.3 million, indicating a reduction in food and beverage sales. Additionally, power and fuel costs rose by 8% to N1.06 billion, up from N981 million the previous year.

The hotel, majority-owned by Sun International, has a long-standing history of indebtedness to Omamo Investment Corporation, a company linked to some of its directors. Over the past decade, these loans have been the subject of ongoing legal disputes. In July 2021, the board of directors of Sun International Limited, the majority shareholder in Tourist Company of Nigeria, reached an agreement with Ikeja Hotels Plc and Omamo Investment Corporation Limited, both shareholders and lenders to the company. However, the devaluation of the Naira in 2023 added N30.3 billion to the company’s liabilities, exacerbating its financial woes.

As a result, shareholders and related party loans ballooned from N31.25 billion at the end of 2022 to N61.5 billion by the end of 2023, reflecting the severe impact of currency devaluation and escalating debt on the company’s financial health.