MTN Nigeria records N740bn forex loss, posts N177.8bn loss before tax

MTN Nigeria Plc has disclosed a substantial foreign exchange (forex) loss of ₦740 billion in its financial year 2023, as outlined in its report released on the Nigeria Exchange Limited (NGX) on Friday.

As a result of this forex loss, the company’s performance was significantly impacted, leading to a loss before tax of ₦177.8 billion, in contrast to a pre-tax profit of ₦518.8 billion in the previous year.

The company’s audited results for the year ending December 31, 2023, revealed a loss after tax amounting to ₦137 billion. This sharp decline starkly contrasts with the restated Profit After Tax (PAT) of ₦348.7 billion reported in 2022.

MTN highlighted that this financial downturn resulted in negative retained earnings and shareholders’ equity, reported at ₦208 billion and ₦40.8 billion respectively, as of December 2023.

The report noted, “The significant devaluation of the naira in 2023 resulted in a materially higher net forex loss of ₦740.4 billion (compared to ₦81.8 billion restated in 2022), reflected within net finance costs, leading to a reported loss after tax of ₦137 billion compared to a restated PAT of ₦348.7 billion in 2022.”

On June 14, 2023, the Central Bank of Nigeria announced changes in Nigerian forex operations, mandating the immediate consolidation of all market segments into the investor and exporter window and reintroducing the ‘willing buyer, willing seller’ model to boost forex liquidity.

This policy shift resulted in a 96.7 percent movement in the exchange rate since the announcement, with the Naira to US Dollar rate standing at N907 at the end of December 2023, as the market sought equilibrium.

MTN indicated that this significant exchange rate movement had a notable impact on its operations, particularly on its operating expenses and net finance costs.

“The most significant of these exposures relate to the tower lease costs, which comprised the bulk of the 45-50 percent foreign currency exposure in our operating expenses in 2023. Our tower lease costs are recognized in line with IFRS 16 and IAS 21, which has had several impacts on our financial performance,” the company stated.

Commenting on these challenges, the CEO of MTN Nigeria, Karl Toriola, remarked: “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.

“Inflation rates increased throughout the year, reaching 28.9 percent in December 2023—the highest reading in 18 years, with an average rate of 24.5 percent.”

Toriola further explained that these challenges were exacerbated by higher fuel prices, following the removal of the fuel subsidy in May 2023, with diesel and petrol prices increasing by 66.4% and 257.1% respectively, reaching N1,416.8/litre and N600/litre in 2023.

To mitigate the impact of these challenges on its operations, Toriola stated that the company continued to invest in network infrastructure, maintaining a disciplined focus on value-based capital allocation and efficiencies to enhance capacity and expand coverage.

“This enabled us to meet the rising demand for data and, coupled with compelling and competitive propositions for our customers, accelerate the growth of our commercial operations,” he added.