MTN Group Ltd., Africa’s largest wireless company, anticipates that Nigeria’s economic reforms, spearheaded by President Bola Tinubu, will result in short-term challenges but ultimately lead to growth by mid-2024. While recognizing the necessity of structural reforms, MTN’s CEO, Ralph Mupita, acknowledges that these changes have brought discomfort to businesses operating in Nigeria. He expects the removal of subsidies and the liberalization of the naira to take a few quarters to stabilize, after which MTN anticipates renewed growth and an improvement in profitability.
Key Points:
- Naira Depreciation Impact:
- The Nigerian government’s easing of foreign exchange controls earlier in the year has led to a significant depreciation of the naira. This has affected company earnings, particularly for businesses like MTN operating in the country.
- Fuel Subsidy Removal and Inflation:
- The removal of fuel subsidies, another key economic reform, has contributed to inflationary pressures in Nigeria. This has created additional challenges for companies in the country.
- Medium-to-Long Term Positivity:
- MTN expresses a positive outlook for Nigeria in the medium-to-long term. The company believes that the ongoing policy reforms are fundamental to its investment case in the country.
- Nigeria’s Significance to MTN:
- Nigeria is MTN’s largest market by subscriber base, and the local unit listed on the Lagos Stock Exchange contributes more than a third of the group’s total revenue. The company sees Nigeria as a crucial driver of digital adoption and financial inclusion.
- Naira Weakness and Dollar Shortage:
- The weakening of the naira is attributed to a scarcity of dollars in the local market, leading to difficulties for companies in repatriating earnings. The Nigerian government is working to address the backlog of dollar demand to stabilize the currency.
- Finance Minister’s Efforts to Attract Inflows:
- Nigeria’s Finance Minister, Wale Edun, aims to attract $10 billion in inflows to alleviate liquidity issues, clear the backlog of dollar demand, and stabilize the currency.
Conclusion: MTN Group anticipates that Nigeria’s ongoing economic reforms, though currently causing discomfort for businesses, will lead to growth and improved profitability by mid-2024. The removal of subsidies, liberalization of the naira, and other structural changes are seen as necessary steps for Nigeria’s economic development. Despite short-term challenges, MTN remains optimistic about the long-term investment potential in Nigeria, emphasizing the country’s pivotal role in driving digital adoption and financial inclusion. The Finance Minister’s efforts to attract inflows are indicative of the government’s commitment to addressing currency stability and liquidity concerns.
