MTN Raises Fears Over FX Liquidity Crisis in Nigeria

MTN Group

By Dipo Olowookere

For the most part of 2020, Nigeria has been battling with a serious liquidity crisis in the foreign exchange (FX) market.

This was mainly caused by the decline in the prices of crude oil at the international market. Nigeria, which is the largest market in Africa, relies heavily on the black gold for its foreign earnings.

As a result, when the price of crude oil is exposed to cold, Nigeria, which is the biggest producer of the commodity on the continent, shivers and when things get better, the country flourishes.

In the year, the Brent crude oil, under which Nigeria’s grade is priced, has traded as low as $20 and this made the federal government to adjust the crude oil benchmark for the year in the budget to $28 per barrel. At the moment, the oil is sold at above $40 per barrel.

This year, in order to manage the liquidity crisis, the Central Bank of Nigeria (CBN) has had to devalue the Naira two times, though it called it a readjustment of the local currency. Before the two actions, the apex bank had said it was not going to devalue the Nigerian currency. The first devaluation was from N306/$1 to N360/$1 and the second was from N360/$1 to N379/$1.

MTN Nigeria, which is one of the companies in the country which needs forex for its business operations, has expressed worry about the situation.

A few days ago, the company released its financial statements for the period ended September 30, 2020, and its chief executive, Mr Ferdi Moolman, said the issue will continue to pose a threat to the business.

“Despite the relaxation of the lockdown restrictions, the operating environment remains challenging. We will continue to build on our operational and financial resilience and execute on our strategy to position the business for sustained growth over the medium and long term.

“The availability of foreign exchange remains a constraint even as we strive to minimise its impact on the business,” Mr Moolman said while commenting on the company’s Q3 performance.

MTN Nigeria, which trades its shares on the Nigerian Stock Exchange (NSE), is the biggest telco in the country. In the first nine months of the year, it grew its revenue by 13.9 per cent to N975.8 billion from N856.6 billion, with voice revenue accounting for N645.5 billion versus N628.3 billion in the same period of last year.

However, its profit after tax went down by 3.3 per cent to N144.2 billion from N149.2 billion in Q3 of 2019 largely due to the 19.5 per cent rise in expenses to N478.0 billion from N400.1 billion, 9.1 per cent year-on-year jump in EBITDA to N497.9 billion from N456.4 billion and a 32.9 per cent increase in the net finance costs to N95.4 billion from N71.8 billion.

Business Post reports that shares of MTN Nigeria rose on the local exchange on Friday by N4 or 2.86 per cent to N144 per unit.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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