MTN Nigeria, one of the country’s leading telecom providers, has encountered significant financial strain attributed to the persistent depreciation of the naira. The company reported a staggering net foreign exchange loss of N656.3 billion in the first quarter of 2024, contributing to a record-high forex loss of N1.396 trillion since 2023.
The depreciation of the naira has posed considerable challenges to MTN Nigeria’s financial performance, resulting in a pre-tax loss of N575.69 billion in 2023. By the first quarter of 2024, the company’s forex losses had further escalated to N695.7 billion, with realized losses totaling N179.6 billion.
To address these financial challenges, MTN Nigeria has embarked on a series of strategic initiatives aimed at reducing its exposure to US dollar volatility. One key measure involves reducing outstanding letters of credit obligations, which are primarily tied to the company’s capital expenditure requirements in foreign currencies. By the end of March 2024, the company had managed to lower these obligations to US$243.4 million from US$416.6 million.
Additionally, MTN Nigeria is reassessing its tower lease contracts, which are predominantly denominated in dollars, contributing significantly to financial strain amidst fluctuating exchange rates. Discussions are underway with key towerco service providers to explore changes to existing contracts, potentially mitigating risks associated with currency fluctuations.
Moreover, MTN Nigeria is advocating for regulated tariff increases and implementing cost reduction measures to sustain its commercial momentum and enhance profitability. The company is engaged in discussions with regulatory bodies to adjust tariffs appropriately, aiming to counter adverse operating conditions and support revenue growth.
These strategic initiatives align with MTN Nigeria’s commitment to optimizing network capacity, minimizing disruptions, and ensuring reliable service delivery to customers. The company also seeks to secure accommodations from lenders to address potential breaches of loan agreements resulting from financial restatements and currency devaluation.
By implementing these measures, MTN Nigeria aims to navigate economic challenges effectively, maintain its strategic objectives, and bolster its financial resilience in the face of ongoing currency fluctuations and regulatory pressures.
Credit: Nairametrics (Text Excluding Headline)
