The company, which estimates that around 40% of its operating costs are denominated in US dollars, is making concerted efforts to reduce its dollar liabilities, Karl Toriola, MTN Nigeria’s CEO, tells The Africa Report.
“But what you have seen in H1 is that we were primarily hit by the actual statement of dollar liabilities. The operating cost did increase by a high rate, but we did not see the full impact of the devaluation because, as you know, devaluation happened at the tail of H1. So, you will see a stronger impact on that in H2,” Toriola says.
The naira’s depreciation and high inflation hit MTN Nigeria’s profits — for the six months to 30 June 2023 — hard, as it did those of many other companies in the country.
MTN reported a H1 profit of N128bn ($169m), down 29.14% from the H1 profit of N181bn ($239m) reported in 2022.
However, Nigeria’s top telecoms service provider saw a 21.96% increase in revenue in H1 2023, from N950bn ($1.26bn) in 2022 to N1.15tn ($1.52bn).
The company’s EBITDA margin would be negatively impacted by around 1.3pp if the exchange rate fluctuated by 10%, according to the telecom giant’s sensitivity analysis.
Finding savings
“It is challenging. The growth of your top line is one mitigant against that, and continuous mitigation optimisation of your core structure by looking for efficiencies,” Toriola says in reference to how the company plans to adapt and thrive despite the challenging operating environment.
Our destiny is inextricably linked with the destiny of Africa. We can’t sell off and go to some other countries
“Trying to localise as much of our expenditure and move away from dollar liabilities and dollar expenditures is another,” he tells The Africa Report.
“Using the economy of scale of not just MTN Nigeria, but MTN Group is another one, then using all technological advancements to deliver capacity at a cheaper unitary price than we had done in the past is another one.”
He also said that the Q3 results would be published in a few days’ time.
Mobile money journey
Toriola maintains that the company is still in the early stages of rolling out its mobile money services and that tangible results should be seen in two to three years.
For the six months to June 2023, MTN Nigeria recorded a 39.4% drop in its fintech subscribers, bringing the total number of users down to 7 million. Out of this number, 44% are MoMo wallet users.
MTN reported a 7.8% increase in fintech revenue despite the fall in customer numbers. Its fintech revenue was N43.6bn ($58m) for the first half of the year, up from N40.4bn ($53m) in the same period last year.
The company lost over $10.5bn due to illegal transfers a few days after it launched MTN Mobile Money (MoMo) in May 2022.
In a lawsuit filed on 30 May 2022, MoMo claimed that $48m was mistakenly transferred to 8,000 accounts held by MoMo users at 18 different banks.
This issue might have led to slower adoption of the firm’s mobile money service.
However, Toriola says: “We started operations, and we are ramping up those operations aggressively. The result will come out in two to three years’ time… Building a mobile money system is a journey.”
He adds that the company is committed to creating and maintaining shared value in Nigeria, which is “absolutely critical to our agenda and our success on a long-term basis”.
“We are African. We have nowhere to run to. Our destiny is inextricably linked with the destiny of Africa. We can’t sell off and go to some other countries. We are in Nigeria forever,” he says.
