MTN Nigeria Suffers A Staggering N740 billion in Forex Losses, Resulting in The Complete Depletion of Shareholders’ Funds
MTN Nigeria Plc has disclosed a significant foreign exchange loss amounting to N740 billion, a stark increase from N81 billion reported in 2022, marking the company’s first reported loss since its listing on the Nigerian Exchange Group (NGX). This loss contributed to a pre-tax deficit of N177.8 billion, a sharp contrast to the N518.8 billion pre-tax profit recorded in the previous year, ultimately resulting in a depletion of shareholders’ funds.
The company attributed this substantial loss primarily to operational shifts in the Nigerian foreign exchange market, particularly the dissolution of the segmented/parallel structure announced by the Central Bank of Nigeria (CBN) in June 2023. MTN utilized an official exchange rate of N907.11/$1 as of December 31, 2023, hinting at potentially broader losses should the prevailing exchange rate between the naira and dollar persist until the end of March when it publishes its Q1 results.
Furthermore, the net loss for the year led to a decline in retained earnings and shareholders’ funds to negative N208.0 billion and N40.8 billion, respectively. As a result of substantial currency devaluation and its adverse impact on retained earnings, the Directors have proposed to forgo issuing a final dividend payment for the year ending December 31, 2023.
Despite these challenges, the company’s revenue witnessed growth, reaching N2.47 trillion for the fiscal year ending December 31, 2023, up from N2.01 trillion in 2022, reflecting a year-on-year increase of +22.69%.
The company said,
“2023 witnessed a very challenging operating environment characterised by rising inflation, currency devaluation and foreign exchange shortages, complicated by geopolitical disruptions and cash shortages in Q1 arising from a redesign of the naira.
“These factors created severe headwinds for our customers and our business during the year. The inflation rate increased throughout the year, reaching 28.9% in December 2023 – the highest reading in 18 years – with an average rate of 24.5%.
“This was further exacerbated by higher fuel prices, arising from the removal of the fuel subsidy in May 2023, with the average prices of diesel and petrol up by 66.4% and 257.1% in 2023 to N1,416.8/litre and N600/litre, respectively. In June 2023, the Central Bank of Nigeria (CBN) adopted a more liberal foreign exchange management system and reintroduced the ‘willing buyer, willing seller’ model.
“This has resulted in a 96.7% unfavourable movement in the exchange rate against the US dollar from N461.1/US$ in December 2022 to N907.1/US$ (Nigerian Autonomous Foreign Exchange Market (NAFEM) rate) in December 2023.
“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”.
