MTN Nigeria’s Forex Losses Nearly Double to ₦887.6 Billion in First Half of 2024

MTN Nigeria Plc has reported a significant foreign exchange net loss of ₦887.6 billion in its operations for the first six months of 2024.

This represents a 95.2% year-on-year increase compared to the ₦454.6 billion loss recorded in the first half of 2023.

The telecommunications giant disclosed these figures in its half-year audited financial results for 2024, filed with the Nigerian Exchange Limited (NGX) on Wednesday.

The breakdown of the foreign exchange net loss reveals that realised foreign exchange losses accounted for ₦367.9 billion, while unrealised foreign exchange losses amounted to ₦519.7 billion.

Impact of Naira Devaluation

MTN Nigeria’s CEO, Karl Toriola, commented on the adverse impact of the naira devaluation on the company’s earnings.

Despite strong revenue growth, the higher general inflation and significant naira depreciation have heavily impacted the company’s cost profile, eroding its earnings.

“Consequently, EBITDA came under pressure, declining by 10.9%, and the EBITDA margin decreased by 17.4 percentage points to 35.6%. Adjusting for the effects of forex on our operating costs, the EBITDA margin would have been 50.9%,” Toriola explained.

The depreciation of the naira from December 2023 to June 2024 resulted in materially higher net forex losses, amounting to ₦887.7 billion, up from the restated ₦454.7 billion in H1 2023.

This significant increase in forex losses led to a loss after tax of ₦519.1 billion compared to a restated loss of ₦85.6 billion in the previous year.

The company’s retained earnings and shareholders’ equity also turned negative, at ₦727.2 billion and ₦577.7 billion, respectively.

Revenue and Profit Analysis

Despite these challenges, MTN Nigeria recorded a revenue of ₦1.53 trillion between January and June 2024, representing a 32.6% increase from ₦1.15 trillion in H1 2023.

The company’s financial report highlighted strong growth in its voice and data services, which generated ₦632.3 billion and ₦727.3 billion, respectively, indicating growth rates of 12.4% and 54.7%.

However, adjusting for the net forex losses, profit after tax (PAT) would have been ₦102.3 billion, down by 56%. Further adjusting for the impact of forex on operating expenses, PAT would have increased by 11.3% to ₦267.5 billion.

Macroeconomic Challenges

Toriola highlighted the challenging macroeconomic conditions in Nigeria during the period, noting that the country has been grappling with rising inflation and the continued depreciation of the naira against the US dollar and other currencies.

“The inflation rate reached 34.2% in June, with an average rate of 32.8% in the first half of the year, while the naira closed June 2024 at ₦1,505/US$ (December 2023: ₦907/US$) at the Nigerian Autonomous Foreign Exchange Market (NAFEM),” he stated.

Outlook and Strategic Focus

Despite these economic headwinds, MTN Nigeria is optimistic about the improving liquidity in the forex market, which has enabled the company to reduce its exposure to foreign currency-denominated obligations.

Also, the Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) by 8 percentage points to 26.75% in the first half of the year to control inflation, leading to higher funding costs but reduced currency volatility.

The Federal Government’s interventions, including an upward review of the minimum wage and a 150-day duty-free import window for food commodities, are also expected to ease the burden on consumers and support economic stability.

Toriola concluded by emphasizing MTN Nigeria’s focus on creating shareholder value through profitable growth, operational efficiency, and scale.

“Despite the backdrop, we aim to build on the strong performance recorded thus far. Our focus remains on creating shareholder value by prioritizing profitable growth, simplicity, and scale,” he said.

MTN Nigeria’s resilience and strategic adaptability in navigating these economic challenges position the company for continued success in the future.