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By Chinenye Anuforo
MTN Nigeria is taking a multi-pronged approach to tackle the challenge of foreign exchange losses that have significantly impacted its bottom line.
The company experienced significant financial strain due to a continued depreciation of the naira, reporting a net foreign exchange loss of N656.3 billion in Q1 2024, contributing to a record high forex loss of N1.396 trillion since 2023.
Economists see the issue as a symptom of broader challenges within the Nigerian economy. A weak naira reflects macroeconomic instability, creating an unpredictable business environment.
“Addressing these underlying issues is essential for building a more attractive and stable business landscape. A stable exchange rate is just one facet of this”, Johnson Chukwu of Cowry Asset Management had stated.
“The recent economic pressures have resulted in a negative net asset position for our company. However, we are determined to navigate these headwinds and ensure the long-term viability of our operations. A central pillar of MTN’s strategy is to lessen its exposure to the volatile dollar. We are actively reducing our US dollar-denominated liabilities. This involves strategically utilizing naira-denominated cash reserves to pay down existing dollar-based obligations,” said MTN Nigeria’s CEO, Karl Toriola, outlining the urgency of the situation.
By the end of March 2024, MTN had already made significant progress, reducing these liabilities by nearly 40%.
Another weapon in their arsenal was a renewed focus on efficiency. MTN implemented a cost-cutting program to streamline operations and eliminate unnecessary spending. They also took a strategic approach to capital expenditure, prioritising investments that would deliver the most significant returns. This meant tightening their belts on some projects but ensured they had the resources for the most critical areas.
Another area of focus is the company’s tower lease agreements, which are predominantly denominated in dollars. “We are considering strategic options to manage these tower lease contracts,” the company explained. This could involve renegotiating terms with tower companies to align lease payments more closely with naira earnings, thereby mitigating the impact of currency fluctuations.
While the challenges remain significant, MTN Nigeria is confident that its multifaceted approach will yield positive results. “By proactively managing our forex exposure and optimising operational efficiency, we are well-positioned to weather the storm and emerge stronger,’ it said.
The company’s commitment to tackling forex losses underscores its determination to ensure continued growth and network investment in the Nigerian telecommunications industry.
