Nigeria’s currency crisis has taken a severe toll on telecommunications giant MTN Nigeria, with the company’s net foreign exchange losses skyrocketing to an unprecedented N1.39 trillion since 2023. This staggering figure is the largest on record for any publicly listed company in the country, underscoring the grave financial strain caused by the naira’s relentless depreciation.
In the first quarter of 2024 alone, MTN Nigeria reported a net forex loss of N656.3 billion, exacerbating the company’s precarious financial position. The mounting losses have eroded MTN’s shareholder’s fund, plunging it into negative territory at a whopping N437 billion, with accumulated losses now standing at N599 billion.
Faced with this dire situation, MTN Nigeria has been forced to implement a series of strategic measures aimed at mitigating the impacts of currency volatility and shoring up its financial resilience.
One key initiative involves reducing the company’s exposure to US dollar-denominated liabilities, particularly outstanding letters of credit obligations tied to capital expenditure requirements. By the end of March 2024, MTN had managed to lower these obligations to US$243.4 million from US$416.6 million at the end of December 2023, utilizing restricted cash balances held in naira.
Additionally, the company is reassessing its tower lease contracts, which are predominantly denominated in dollars, contributing significantly to the financial strain amid fluctuating exchange rates. MTN is engaged in constructive discussions with tower service providers to explore potential modifications to these contracts, with the goal of aligning expenses more closely with its naira earnings.
In its efforts to stabilize its balance sheet, MTN Nigeria is also lobbying for regulated tariff increases, a measure it deems crucial for maintaining investment levels and ensuring the long-term viability of the industry. The company is also focused on driving revenue growth and operational efficiency through expense reduction programs and a strategic approach to capital expenditure, prioritizing investments that offer the most value.
Furthermore, MTN has secured accommodations from its lenders concerning any potential breaches of loan covenants resulting from the significant currency devaluation and the company’s negative net asset position. These measures are aimed at enabling MTN to persist in executing its strategic plans and implementing the outlined interventions.
As Nigeria’s currency crisis persists, the fate of MTN Nigeria and its ability to weather the storm remain uncertain. However, the company’s proactive measures and strategic initiatives underscore its determination to navigate these turbulent economic waters and emerge stronger on the other side.
and then