MTN Lost N1.9b Amist Economic Twist
In a recent corporate notice, MTN Nigeria Communications Plc has unveiled plans to issue up to N50bn in Series 11 and 12 commercial paper notes, as part of its N250bn commercial paper issuance program. The telecommunication giant aims to diversify its financing options and bolster short-term working capital requirements.
This announcement follows MTN Nigeria’s successful series 10 commercial paper issuance in late 2023, which saw a staggering 149% subscription rate and yielded N72.1bn.
Despite the positive results of MTN Nigeria’s recent commercial paper issuance, the company reported a staggering N1.9bn loss for the first nine months of 2024. CEO Karl Toriola attributed this to a host of factors, including naira devaluation, increased energy costs, inflationary pressures, and the introduction of value added tax on leases in September 2023.
Despite achieving a 33.6% growth in service revenue and reaching N2.4tn for the first nine months of 2024, MTN Nigeria’s Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) fell by 5.3%, which the CEO chalked up to persistent currency depreciation, higher energy costs and inflationary environment, as well as the recent introduction of VAT on leases in September 2023.
This, in turn, resulted in a loss after tax of N514.9bn for the period, leading to negative retained earnings and shareholders’ equity. The CEO emphasized the company�
The CEO stressed that MTN Nigeria’s operations remained resilient in the face of mounting challenges, citing the telecommunication giant’s “resilient business model and operational agility”.
The company continues to navigate difficult economic waters in Nigeria, as the naira devaluation, rising energy costs and inflationary pressures remain major obstacles to be overcome. With the introduction of VAT on leases adding to the mix, MTN Nigeria is being put to the test in its ability to maintain profitability and financial stability.
The pressure on MTN Nigeria is compounded by the negative impact of these factors on its shareholders’ equity and retained earnings, leading to substantial losses in the first nine months of 2024.
While the company’s ability to generate revenue remains strong, with service revenue growing by over 33%, the mounting challenges in Nigeria’s economic landscape have created significant hurdles to profitability and long-term sustainability.
In the coming months, MTN Nigeria’s management will be faced with the challenging task of navigating the turbulent waters and finding ways to adapt and sustain its operations amid the ongoing economic volatility in the country.
The predicament facing MTN Nigeria mirrors the broader challenges confronting the Nigerian economy, which has struggled with currency devaluation, inflationary pressures and rising energy costs.
The country’s central bank, in an effort to curb inflation, has maintained a tight monetary policy that has contributed to the depreciation of the naira against major currencies. This has had a detrimental effect on businesses that rely on imported goods, as the weakened currency makes imports more expensive.
In this environment, MTN Nigeria’s ability to adapt to the changing circumstances will be crucial for its survival and future growth.
References and Citations:
- Nairametrics – MTN Nigeria to issue N50 billion in new commercial paper to support working capital
- Punch – MTN to issue N50 billion in commercial papers
- Premiumtimes – MTN Nigeria plans N50 billion commercial paper.
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