Nigeria’s telecommunications giant, MTN Nigeria Plc, has released its financial report for the year 2023, revealing a substantial loss before tax amounting to N177.8 billion.
This stark contrast to the pre-tax profit of N518.8 billion recorded in the previous year marks a significant setback for the company, leading to the complete wipe-out of shareholders’ funds.
The massive losses incurred by MTN Nigeria are primarily attributed to a staggering foreign currency loss of N740 billion, representing a dramatic increase from the N81 billion reported in the preceding year. Such a profound financial blow to the company, which has historically been a profitable entity since becoming a quoted company in Nigeria, has sent shockwaves through the market.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
MTN Nigeria attributed these staggering losses to operational challenges stemming from changes in the Nigerian foreign exchange market, particularly the abolition of the segmented/parallel structure announced by the Central Bank of Nigeria (CBN) in June 2023. The company noted the adverse impact of these regulatory changes, which significantly contributed to the unfavorable financial outcomes reported.
“This has resulted in a 96.7% unfavourable movement in the exchange rate against the US dollar from N461.1/US$ in December 2022 to N907.1/US$ (Nigerian Autonomous Foreign Exchange Market (NAFEM) rate) in December 2023,” it said.
However, the company cautioned that the losses could widen if the prevailing exchange rate between the naira and the dollar persists until the end of March when it publishes its Q1 results.
Despite grappling with financial setbacks, MTN Nigeria reported notable operational highlights. Total revenue for the year 2023 amounted to an impressive N2.469 trillion, reflecting a substantial 22.69% year-on-year increase. Operating profit also demonstrated resilience, reaching N773.660 billion, up 5.38% from the previous year. However, finance costs surged to N236.927 billion, and the company incurred a substantial net FX loss of N740.434 billion.
The financial downturn resulted in a significant decline in profit after tax, with a loss of -N137.021 billion recorded for the year, compared to a profit of N348.727 billion in the previous year. Earnings per share also witnessed a sharp decline, falling to -N6.38 from N16.76 in the preceding year.
Furthermore, MTN Nigeria reported an increase in total borrowing, reaching N1.177 trillion in 2023, reflecting a remarkable 70.69% year-on-year increase. Despite these financial challenges, the company reported growth in key operational metrics, including total subscribers, active data users, and active mobile money wallets.
However, the financial downturn has resulted in a depletion of retained earnings and shareholders’ funds, which now stand at negative N208.0 billion and N40.8 billion, respectively. Consequently, the company’s directors announced their decision not to propose a final dividend payment for the year ended December 31, 2023, citing the resultant loss.
Amidst these financial headwinds, MTN Nigeria reiterated its commitment to maintaining strong free cash flow generation, which increased by 11.6% year-on-year to N631.6 billion. Nevertheless, shareholders remain deeply concerned, particularly in light of the company’s declining stock performance. MTN Nigeria Communications Plc (MTNN) closed at N222.90 on the last day of February, reflecting a year-to-date loss of 15.6% for shareholders.
MTN noted in its commentary that the challenging operating environment characterized by rising inflation, currency devaluation, and foreign exchange shortages has posed significant obstacles to its market growth. The company also highlighted geopolitical disruptions and cash shortages in Q1 arising from a redesign of the naira as additional challenges.
The company’s statement: “2023 witnessed a very challenging operating environment characterized by rising inflation, currency devaluation, and foreign exchange shortages, complicated by geopolitical disruptions and cash shortages in Q1 arising from a redesign of the naira.
“These factors created severe headwinds for our customers and our business during the year. The inflation rate increased throughout the year, reaching 28.9% in December 2023 – the highest reading in 18 years – with an average rate of 24.5%.
“This was further exacerbated by higher fuel prices, arising from the removal of the fuel subsidy in May 2023, with the average prices of diesel and petrol up by 66.4% and 257.1% in 2023 to N1,416.8/liter and N600/liter, respectively. In June 2023, the Central Bank of Nigeria (CBN) adopted a more liberal foreign exchange management system and reintroduced the ‘willing buyer, willing seller’ model.
“This has resulted in a 96.7% unfavorable movement in the exchange rate against the US dollar from N461.1/US$ in December 2022 to N907.1/US$ (Nigerian Autonomous Foreign Exchange Market (NAFEM) rate) in December 2023.
“This development contributed meaningfully to the upward pressure on the cost of doing business in Nigeria, and for MTN Nigeria in particular, significantly increased the costs in relation to our tower leases.”