The operations of MTN Nigeria and Airtel Africa have been severely impacted by the country’s foreign exchange (forex) volatility, as both service providers reported significant losses after taxes.
According to MTN unaudited results for the quarter that ended March 31, 2024, and Airtel Africa’s results respectively, MTN recorded a loss after tax of N392.7 billion, while Airtel Africa reported a loss after tax of $89 million.
This was primarily due to significant forex headwinds, resulting in a $549 million exceptional loss net of tax following the Nigerian naira devaluations in June 2023 and the first quarter of 2024, and the Malawian kwacha devaluation in November 2023.
With a net loss for the quarter, MTN reported a further increase in its accumulated losses and negative shareholders’ funds to N599.2 billion and N434.7 billion, respectively. Its profit after tax (PAT), adjusted for the net FX loss, fell by 57.8% to N47.1 billion.
The study also revealed that, excluding leases, MTN’s capital expenditure (capex) climbed by 84.4 percent to N78.1 billion, or 49.1 percent,to N179.7 billion.
According to Airtel Africa, its spending was roughly unchanged at $737 million and fell short of our projections, mostly as a result of a delay in data centre expansions. The telecom, which is present in 14 countries across the continent, added, “In addition, we invested $152 million in licence renewal and spectrum acquisitions, including $127 million for the Nigerian 3G licence renewal.”
The value of the Nigerian naira declined dramatically during the period under study, from 461 per US dollar in March 2023 to 1,303 per US dollar in March 2024.
The devaluation of the naira had an effect of $1,042 million and $554 million, respectively, on reported revenue and EBITDA for the first quarter.
Since there were several instances of currency devaluation throughout the year, revenue and EBITDA for the reporting period do not accurately reflect the impact for the entire year.
Because of this, the currency challenges encountered in FY’24 will still be reflected in the reported currency results for the following fiscal year.
The Group’s reported revenue for the first quarter would have decreased by $603 million to $4,376 million (a 16.7% YoY decline) if the closing rate of 1,303 NGN/USD had been used to consolidate the results, rather than the reported 5.3% decline. Similarly, with an EBITDA margin of 48.1 percent (Q4’24: 46.4 percent), EBITDA would have decreased by $324 million to $2,104 million (18.3 percent YoY fall) as opposed to the reported 5.7 percent decline.
Karl Toriola, CEO of MTN Nigeria, stated that despite a solid operating performance, there were significant macroeconomic obstacles.
What they’re saying
“With rising inflation and the naira depreciating further from an already low base, the operating environment remained extremely challenging in the first quarter.” From N907/US$ at the end of December 2023, the naira sank to an all-time low of N1,627/US$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM) in March
CEO of Airtel Africa, Olusegun Ogunsanya,said;
“We are in a strong position to take advantage of the continued growth potential that exists in all of our markets.As the year goes on, we’ll keep our attention on increasing the margin from its current level.
Bottom Line
The inflation rate continued its increasing trend, hitting 33.2% in March after averaging 31.6 % for the quarter
Financing expenses have grown as a result of the Central Bank of Nigeria’s (CBN) 4pp hike in the Monetary Policy Rate (MPR) to 22.75 percent in an effort to reduce inflation. These elements have resulted in serious challenges for companies that operate in Nigeria, such as MTN Nigeria, increasing customer pressure, operating costs, and foreign exchange (forex) losses.
