MTN Nigeria Faces Stock Decline Amid Naira Devaluation Losses

MTN Nigeria’s stock faced a significant decline, dropping 9.1% amid financial losses due to naira devaluation. The company reported a net loss of 399.45 billion naira for the year. Operational costs surged, but anticipated tariff increases may lead to future profitability as the naira stabilizes.

MTN Nigeria has experienced a significant stock decline, with share prices plummeting 9.1% to 240 naira before achieving a modest recovery. This downturn marks the largest drop in ten months, primarily attributed to a second consecutive year of financial losses resulting from a severe devaluation of the naira. The telecommunications giant reported a net loss of 399.45 billion naira ($266 million) for the year ending December, a substantial deterioration from a 133.8 billion naira loss in 2023, largely owing to foreign exchange losses related to dollar-denominated liabilities.

The naira faced a stark depreciation, losing approximately 40% of its value throughout 2024 as currency reforms loosened its fixed exchange rate against the dollar, despite achieving relative stability since early December. Matilda Adefalujo, an equity analyst at Meristem Securities, highlighted the considerable strain on the company regarding operational expenses, which surged by 76.6%. Furthermore, the margin on earnings before interest, taxes, depreciation, and amortization contracted by 9.6 percentage points.

Despite financial setbacks, MTN Nigeria, the largest telecom company in the nation, anticipates improvements following recent government authorization to increase service tariffs. Such measures are expected to propel service revenue growth and lift the EBITDA margin to at least the mid-40% range in 2025. Adefalujo confidently stated, “The increase in tariff and relative stability of the naira should be able to bring MTN back to profitability.”

In summary, MTN Nigeria’s stock plummeted due to substantial losses stemming from naira devaluation, leading to a reported net loss for the year. The telecommunications firm faces ongoing financial challenges, with rising operational expenses and shrinking profit margins. Nevertheless, anticipated government-approved tariff increases may restore profitability as the naira stabilizes. Investors remain cautiously optimistic about MTN Nigeria’s recovery in the coming year.

Original Source: businessday.ng