MTN Nigeria Stock Faces Decline Amid Naira Devaluation and Losses

MTN Nigeria’s stock fell 9.1% before rebounding as it reported a net loss of 399.45 billion naira for fiscal year 2024, exacerbated by the naira’s 40% devaluation. The company’s operational costs surged while its profit margin shrank. However, government-approved tariff increases are expected to enhance revenue and margins in the future, pending currency stability.

MTN Nigeria Communications Plc experienced a significant decline in its stock price, dropping 9.1% to 240 naira, reflecting investor concern over the company’s financial performance attributed to the ongoing devaluation of the naira. After this dip, the stock recovered to trade at its opening price. Investors reacted to a considerable net loss reported for the year, amounting to 399.45 billion naira ($266 million), a notable increase from the previous year’s loss of 133.8 billion naira, primarily due to foreign exchange losses arising from obligations denominated in foreign currency.

In 2024, the naira depreciated by approximately 40% following currency reforms intended to adjust its stability against the dollar. However, since early December, the currency has shown signs of relative stability. Matilda Adefalujo, an equity analyst at Meristem Securities in Lagos, noted that the company is facing substantial challenges with its cost management as operational expenses surged by 76.6%. Additionally, the EBITDA margin experienced a reduction of 9.6 percentage points.

As the largest telecommunications provider in Nigeria, MTN Nigeria has received recent government approval to increase its tariffs. This regulatory change is expected to enhance service revenue growth and facilitate a projected EBITDA margin improvement to “at least mid-40%” by 2025. Adefalujo expressed optimism, stating, “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 has faced turbulent times due to significant financial losses resulting from naira devaluation. With operational costs rising sharply and decreased profit margins, the telecom giant anticipates recovery through approved tariff increases and improved currency stability. Analysts, however, remain cautious, highlighting the ongoing challenges the company faces as it navigates these economic factors.

Original Source: businessday.ng