MTN Nigeria, the biggest international subsidiary of the local group, reported a 56% slide in taxed profit to N102.3 billion (R1.1bn) for the six months to June 30 as sky-high inflation and currency woes impacted consumer spending and raised business costs, as its economy continues to struggle.

CEO Karl Toriola said the inflation rate in Nigeria reached 34.2% in June, with an average at 32.8% in the first half. The naira had depreciated to N1505 per US dollar by the end of June, from N907 at the end of December 2023, or by about 40%.

In addition, the Central Bank of Nigeria raised the interest rate by 8 percentage points to 26.75% in the first half to control inflation. About a third of South Africa-based MTN Group profit is derived from Africa’s most populous nation.

In an effort to help consumers, the Nigerian government raised the minimum wage, allowed a 150-day duty-free window for food, and other initiatives to increase food supply. An online search by Business Report showed that the Nigerian government has threatened to bring in the military to counter Kenya-style mass demonstrations against poverty and the government, which had been scheduled to start today (Thurs).

Toriola said these headwinds put pressure on consumers and had increased the cost of doing business, including resulting in additional foreign exchange losses.

In addition, the group had to manage the Nigerian Communications Commission’s industry-wide NIN-Sim directive, and the client base increased 2.9% to 79.4 million after limiting the decline due to this directive to 280 000 customers in the period.

He said service revenue had increased broadly in line with inflation by 32.6% in the first half, driven by data and supported by voice, fintech and digital services. But earnings before interest, tax, depreciation and amortisation (Ebitda) came under pressure due to the factors above and declined by 10.9%, and the Ebitda margin fell 17.4 percentage points to 35.6%. Adjusting for the effects of foreign exchange, the Ebitda margin would have been 50.9%.

Toriola said they were expanding capacity to meet demand for their services, including constructing the “largest and most resilient” data centre in West Africa.

He said they had made progress on initiatives to grow revenue, improve margins and strengthen the balance sheet. Negotiations with authorities on a tariff increase were ongoing, and capital expenditure and other expenses were being managed to reduce dollar exposures. Tower lease agreements were being reviewed.

“The strides achieved in executing these initiatives are encouraging and set the business up well to improve our profitability and negative asset position,” Toriola said.

BUSINESS REPORT