Telecommunication giants MTN Nigeria and Airtel Africa have significantly reduced their foreign exchange (FX) exposures due to the naira’s severe depreciation, which has caused substantial financial losses despite strong revenue growth.
In the first half of 2024, MTN Nigeria and Airtel Africa cut their combined FX exposures from $966.6 million in December 2023 to $100 million. This drastic reduction in FX debt is crucial for mitigating the impact of currency volatility on their financial performance.
The naira’s depreciation from N471/$ to N1,384/$ over the past year has undermined revenue gains for both companies. MTN Nigeria reported a 32.83% increase in revenue to N1.54 trillion in H1 2024 but faced a loss after tax of N519.1 billion. Airtel Nigeria’s revenue rose by 35.29% to N700.90 billion, yet its dollar-denominated revenue plummeted from $1.07 billion to $522 million.
To combat these losses, MTN reduced its outstanding letters of credit (LC) from $416.6 million to $100 million. MTN CEO Karl Toriola highlighted progress in managing FX obligations and improving forex liquidity. Similarly, Airtel Africa repaid $550 million in external debt, achieving a zero-debt position at the holding level.
Despite these efforts, both telcos are still heavily reliant on FX for essential operations. The Central Bank of Nigeria (CBN) reported a 57% increase in FX inflows to $8.86 billion in February 2024. However, the telecom sector continues to face challenges due to its capital-intensive nature and rising operational costs.
Analysts note that while revenue growth has slowed, and operating costs have increased, telcos are actively seeking local solutions and bulk payments to manage expenses. The sector’s long-term financial stability remains under pressure as it adapts to the volatile FX environment.