MTN Nigeria Communications Plc has released its financial results for the nine months ending September 30, 2024, revealing challenges, loss, and growth in certain areas.

The telecom giant reported a notable loss after tax of N514.9 billion, with a third-quarter Profit After Tax (PAT) of N4.1 billion. When adjusted for the net foreign exchange loss, PAT stood at N118.5 billion, marking a substantial 59.2% decline. This loss was primarily attributed to the persistent devaluation of the naira, with the N514.9 billion recorded reflecting a slight decrease from the N519.1 billion reported in the half-year results.

The telecom giant showed a 33.6% increase in service revenue, totaling N2.4 trillion. However, its subscriber base saw a decrease of 0.9%, dropping to 77 million. This reduction was primarily due to regulatory pressures, specifically the National Identity Number (NIN)-SIM linkage mandate, which required telecom providers to deregister non-compliant Subscriber Identity Module (SIM) cards.

Meanwhile, active data users grew by 5.1% to 45.3 million, demonstrating continued demand for internet connectivity amid digitalization trends. Yet, active mobile money (MoMo PSB) wallets dropped significantly by 21.8% to 2.8 million, indicating challenges in expanding financial service offerings under current economic conditions.

A detailed examination of MTN Nigeria’s operating metrics reveals further areas of strain. Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) declined by 5.3%, totaling N860.2 billion, while the EBITDA margin dropped by 14.9 percentage points to 36.3%.

Commenting on the financial outcome, MTN Nigeria’s CEO, Karl Toriola, referred to the company’s performance as “resilient” in the face of macroeconomic and regulatory challenges. He acknowledged the significant impact of inflationary pressures and exchange rate depreciation on operational costs, describing the environment as “persistently challenging.”

“In the first nine months of 2024, we sustained the growth in our underlying operating performance—underpinned by our resilient business model and operational agility—despite challenging conditions,” Toriola noted.

He explained that average inflation rates reached 32.8% during this period, up from 24.5% in the previous year. He highlighted the steps taken by the Central Bank of Nigeria (CBN) to counter inflation, including raising the Monetary Policy Rate (MPR) by 8.5 percentage points to 27.25%.

Although this monetary policy adjustment helped to stabilize the forex market, it resulted in increased funding costs and squeezed consumer purchasing power, directly affecting MTN’s business activity and the broader telecommunications market.

In an attempt to break even, MTN and other telcos have been pushing for regulatory approval from the Nigerian Communications Commission (NCC) to review and increase tariffs on calls and data, which could allow the company to offset some of the cost impacts from the naira’s devaluation and inflation. However, the NCC has so far denied requests for a tariff review, citing Nigeria’s difficult economic conditions as a key factor in its decision. The regulator’s stance is rooted in a concern for consumer welfare amid rising prices in nearly all sectors, leaving telecom companies like MTN to navigate these cost burdens without passing them onto the customer base.

To address short-term liquidity needs and manage the operational costs posed by currency depreciation, MTN Nigeria has announced plans to issue a new series of commercial papers (CP). The company aims to raise N50 billion under its N250 billion Commercial Paper Issuance Programme, as detailed in its notification to the Nigerian Exchange Limited and the public. This move is intended to bolster MTN Nigeria’s short-term working capital while diversifying its financing base, allowing the company to tap into the debt market as a more flexible source of funding to meet immediate financial obligations.

The naira’s depreciation has notably affected MTN’s ability to maintain its previous dividend levels for shareholders. In 2023, the company recorded a net foreign exchange loss of N740.4 billion, a staggering 805% rise from 2022, when forex losses stood at N81.8 billion. This sharp increase in foreign exchange losses was compounded by the CBN’s decision in June 2023 to end its multiple exchange rate policy, floating the naira. This move saw the exchange rate surge from N461.1 per dollar in December 2022 to N907.1 per dollar by December 2023, a change that placed immense pressure on MTN and other foreign revenue-dependent entities.

Looking forward, MTN Nigeria is expected to continue navigating these economic and regulatory headwinds, focusing on strategies to improve operational efficiency and streamline costs. Toriola reiterated the company’s commitment to expanding its commercial operations while addressing inflationary impacts on consumers’ spending power.

President Bola Tinubu’s proposed tax reform bills have continued to meet with stiff resistance from Northern leaders, who argue the policies could severely impact their region’s revenue streams.

Leading the charge is Ali Ndume, a federal lawmaker representing Borno South Senatorial District in the National Assembly. Ndume has denounced the bills as “dead on arrival,” acknowledging concerns that the legislation would deepen the financial challenges in Nigeria’s northern regions.

Opposition to the bills has been backed by Northern political figures, traditional rulers, and even the Northern Governors’ Forum, who view the proposed tax policies as a direct threat to their regional economic stability. According to Ndume, the widespread sentiment in the North is against the VAT restructuring component, which would change how VAT is distributed between the federal government and the states.

Northern leaders argue that, given their region’s relatively limited industrial and economic activity compared to the South, any decrease in federal revenue allocations could leave them vulnerable.

“Our people are saying they don’t want the VAT bill; they don’t even want to hear about it,” Ndume declared on Channels Television’s Politics Today program.

He urged President Tinubu to heed the advice of the Northern Governors’ Forum and the National Economic Council (NEC) to withdraw the bill immediately.

“It will be fair to shut the bill down; it is the fairest thing to do,” Ndume added, noting that he has already started rallying his colleagues to reject the bills outright.

Background on the Tax Reform Bills

The tax reform bills, first introduced as part of President Tinubu’s broader fiscal strategy, seek to diversify Nigeria’s revenue sources beyond oil and boost tax collection across all sectors. At the heart of the proposed changes are measures that would restructure Value Added Tax (VAT) allocations, aiming to improve equity in revenue distribution and streamline tax collection nationwide.

Many have argued that these reforms will reduce Nigeria’s heavy dependence on crude oil revenue, create a more balanced economy, and ultimately fund national development initiatives. However, the proposed shift has sparked fierce resistance from northern leaders, who worry that it could lead to a revenue shortfall for their region, which is heavily dependent on funds generated from the oil-rich South.

The economic disparities between Nigeria’s northern and southern regions have long fueled tension in revenue-sharing discussions. The North, which holds significant political influence, is often criticized as economically dependent on the oil and tax revenue generated primarily in the South. Critics frequently characterize the North as a “parasite” in the nation’s fiscal structure, benefiting disproportionately from federal allocations sourced from southern wealth.

Against this backdrop, the new tax reforms are seen as a threat to this status quo. The VAT restructuring, for instance, would reduce the federal government’s VAT pool, which currently benefits states with lower economic activity. Under the new system, VAT revenue may increasingly flow back to the areas where it is generated, predominantly in the South, thereby challenging the North’s dependence on federal allocations for its budgetary needs.

However, in addition to revenue sharing concern, Ali Ndume’s argument reflects a larger sentiment among many that current economic conditions—marked by high inflation, currency devaluation, and diminished purchasing power—are not conducive to implementing new taxes.

“Nigerians are willing to pay taxes but only when they can afford it,” he remarked. “Right now, people are struggling to survive. Let people live first before you start asking them for taxes.”

Ndume, who belongs to President Tinubu’s All Progressives Congress (APC), argued that the current economic climate demands tax relief, not additional burdens. According to him, the tax reform bills will only exacerbate economic hardship for everyday Nigerians. He noted that before imposing additional taxes, the government should focus on internal reforms to reduce wasteful spending and create a more transparent governance structure.

“What he [Tinubu] needs to do is to withdraw the bill, educate Nigerians, and make us understand it,” Ndume stated. “We are representing the people, and they have already made their stance clear.”

This opposition has drawn considerable attention from Nigeria’s 36 state governors, many of whom have joined calls for Tinubu to reconsider the bills.

Tinubu Stands His Ground But There’s Possibility Amendments

Despite the mounting criticism, President Tinubu has shown no intention of retracting the bills. However, he has expressed a willingness to consider “inputs and necessary changes” from lawmakers. The President’s openness to amendments suggests that there may be room for compromise, though he remains adamant about moving forward with the reforms as part of his broader economic restructuring agenda.

Tinubu’s administration is keen on its belief that the tax reforms are essential for addressing Nigeria’s fiscal deficit and funding national development. The bills also align with the recommendations of the National Economic Council (NEC), which emphasizes the need to broaden the tax base to reduce dependency on oil revenues and ensure more equitable development. However, without Northern support, pushing the reforms through the National Assembly will likely be challenging.