MTN Nigeria reported a net foreign exchange loss of N656.3 billion in the first quarter of 2024 as a continuation of the naira’s depreciation ravaged the company’s balance sheet.
MTN’s foreign exchange loss since 2023 has now risen to a staggering N1.396 trillion, the largest on record for any publicly quoted company in the country.
MTN recorded the most forex losses in 2023, when it reported a forex loss of N740.4 billion based on information in its audited accounts.
The losses have now resulted in the company’s shareholder’s fund falling to a negative N437 billion, with accumulated losses now N599 billion.
MTN’s forex losses were expected in 2024 after the exchange rate depreciation continued in the first quarter of the year.
In response to these challenges, MTN Nigeria is actively pursuing strategies to reduce its exposure to US dollar volatility.
One significant measure is the reduction of outstanding letters of credit obligations, which are largely tied to the company’s capital expenditure needs in foreign currencies.
By the end of March 2024, the company had managed to lower these obligations to US$243.4 million from US$416.6 million at the end of December 2023.
According to the company, the reduction was facilitated by utilizing restricted cash balances held in naira.
Additionally, MTN is reassessing its tower lease contracts, which are predominantly denominated in dollars, a factor that contributes to financial strain amid fluctuating exchange rates.
As Nairametrics reported, there are growing pressures from some shareholders to convert these leases into naira-denominated contracts to better align with the functional currency of the company.
Tower leases contributed approximately 50% of its foreign exchange losses in 2023, and in the first quarter of this year, they contributed N289.3 billion or 44% of net foreign exchange losses.
How MTN Plans to fix its balance sheet
MTN Nigeria outlined a multifaceted strategy aimed at sustaining its commercial momentum and enhancing profitability.
This strategy includes regulated tariff increases, which MTN views as crucial for maintaining its investment levels and ensuring the long-term viability of the industry.
Addressing the Negative Capital Position
In response to these economic pressures, MTN has implemented several key initiatives.
On debt, MTN Nigeria said it has secured the required accommodations from its lenders concerning any impacts on loan agreements due to the restatement of financial statements.