MTN Nigeria Plc reported a loss before tax of N177.8 billion, a significant shift from the pre-tax profit of N518.8 billion in the previous year.
This substantial change was attributed to the telecom operator’s significant forex loss of N740.4 billion, primarily due to the steep devaluation of the naira in 2023.
The company’s audited results for the year ended December 31, 2023, revealed this information in a release on Friday.
As a result of the financial downturn, MTN reported a loss after tax of N137 billion, in stark contrast to the restated Profit After Tax (PAT) of N348.7 billion reported in 2022.
The telecommunications company indicated that the impact of this financial downturn also affected negative retained earnings and shareholders’ equity, reported at N208 billion and N40.8 billion, respectively, as of December 2023.
Taking into account the significant net forex loss, the restated Profit After Tax (PAT) would have been N344.5 billion, showing a decrease of 14.3 percent.
The report stated, “The significant devaluation of the naira in 2023 resulted in a materially higher net forex loss of N740.4bn (2022 restated: N81.8bn), reflected within net finance costs, which resulted in a reported loss after tax of N137bn compared to a restated PAT of N348.7bn in 2022.”
On June 14, 2023, the Central Bank of Nigeria made alterations to the country’s forex operations, mandating the merging of all market segments into the investor and exporter window. Additionally, they reintroduced the ‘willing buyer, willing seller’ model to enhance forex liquidity.
As a result, there was a substantial 96.7 percent shift in the exchange rate since the NAFEM rate was announced at N907/US$ at the end of December 2023, as the market sought an equilibrium level.
MTN noted that this significant movement in the exchange rate had a notable impact on its operations, particularly 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.”
MTN noted that majority of the lease costs were indexed to the dollar but were invoiced and paid in 9zzt.
“Our tower lease costs are recognised in line with IFRS 16 and IAS 21, which has had several impacts on our financial performance,” the operator said.
The CEO of MTN Nigeria, Karl Toriola commented, “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. These factors created severe headwinds for our customers and our business during the year.
Throughout the year, the inflation rate surged, peaking at 28.9 percent in December 2023, marking the highest level in 18 years. The average rate stood at 24.5 percent.
The CEO highlighted that this increase was further aggravated by soaring fuel prices, driven by the removal of the fuel subsidy in May 2023. Diesel and petrol prices surged by 66.4% and 257.1% in 2023, reaching N1,416.8/litre and N600/litre, respectively.
To counteract the impact of these challenges on its operations, Toriola emphasized that the company remained committed to investing in network infrastructure. This strategic approach, characterized by prudent capital allocation and operational efficiencies, aimed to bolster capacity and extend 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 said.
Other notable highlights from the report include: a 5.3 percent increase in total subscribers to 79.7 million; a 12.7 percent rise in active data users to 44.6 million; a significant 163.2 percent surge in active mobile money (MoMo PSB) wallets to 5.3 million; a 22.4 percent growth in service revenue to N2.5 trillion; a 12.3 percent increase in earnings before interest, tax, depreciation, and amortization (EBITDA) to N1.2 trillion; and a 4.5 percentage point decrease in EBITDA margin to 48.7 percent.