MTN Nigeria has maintained a consistent profit streak for over a decade, driven by its dominant market share and growing subscriber base. The recent naira devaluation has dramatically reversed this and significantly affected the company’s financial performance.
This article explores the relationship between the devaluation of the naira and MTN Nigeria's revenue and profits, emphasising the primary factors that have precipitated this financial crisis.
MTN Nigeria's revenue and profit over the years
Despite robust revenue performance, MTN Nigeria Communications Plc experienced record losses due to depreciation. As of December 2023, MTN had 79.7 million subscribers and reported its first post-tax loss of ₦137 billion since its 2019 listing on the Nigerian Stock Exchange. The telecom giant also incurred foreign exchange losses totaling ₦740 billion.
After Q2 2024, MTN cut its outstanding letters of credit (LC) from $416.6 million in December 2023 to $100 million, mitigating the impact of future naira depreciation and associated finance costs.
Impact of Naira Devaluation
MTN Nigeria's recent financial difficulties have been exacerbated by the devaluation of the naira and fluctuating crude prices over the years. The cost of importing technology, equipment, and other essential services keeps increasing as the naira weakens, resulting in higher operational costs for MTN Nigeria. This has directly impacted the company's profitability, with the challenge of maintaining its competitiveness in a market that is extremely price-sensitive while also managing its increasing expenses.
The value of the Nigerian naira has gone up by 95% just seven months into Tinubu's tenure. This has in turn affected MTN Group which recorded a significant loss due to the naira's devaluation.
Subscriber base and revenue contributions
Economic challenges notwithstanding, MTN Nigeria's subscriber base has continued to grow, driven by the increasing demand for mobile services in a largely underserved market. However, this growth has not been sufficient to offset the financial strain caused by the naira's devaluation. While more subscribers means higher revenue, the cost of serving these customers has increased disproportionately due to the naira’s decline.
Conclusion
The naira's devaluation has undoubtedly disrupted MTN Nigeria's profit streak, resulting in the transformation of the once-thriving business into a company that is presently grappling with declining profit margins.
MTN Nigeria's financial performance is anticipated to remain under duress as the naira continues to experience downward pressure unless substantive economic reforms are implemented to stabilise the naira.
