Naira Depreciation Wreaks Havoc on Telcos: MTN, Airtel Struggle to Stay Afloat

Nigerian telecommunication companies are charting a naira-heavy path to boost profitability after incurring a $1.56 billion foreign exchange loss in 2023 due to the naira’s sharp depreciation against the dollar.
Since the end of 2023, MTN and Airtel have taken steps to reduce dollar-denominated debt. They have reduced external loans, made significant payments for inputs denominated in foreign currencies, and are renegotiating contracts. MTN and Airtel reduced their external borrowings from $966.6 million in December 2023 to $100 million in June 2024.
The consolidation of the Nigerian foreign exchange market by the Central Bank of Nigeria (CBN) in June 2023 caused a sharp devaluation of the Naira, which fell from N471/$ before the switch to N1,043.09/$ on December 28, 2023, and N1,574.20/$ on August 9, 2024.
Despite strong sales performance, the depreciation have led MTN Nigeria Communications Plc and Airtel Africa to incur record losses. MTN, which had 79.7 million subscribers as of December 2023, reported its first after-tax loss of N137 billion in 2023 since listing on the Nigerian Stock Exchange in 2019. The telecommunications company suffered foreign exchange losses of N740 billion ($815.79 million at N907.1 to the dollar).
Airtel Africa, which had 50.9 million subscribers in Nigeria as of March 2024, reported an after-tax loss of $89 million for the full financial year ended March 2024, mainly due to currency headwinds in Nigeria and Malawi. The company lost $1.26 billion on derivatives and foreign exchange risks, of which $770 million was due to the devaluation of the naira. Gbenga Adebayo, president of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), noted that “Both MTN and Airtel have declared significant foreign exchange (FX) losses in Nigeria, and the stress is not linked to them alone.”

According to the Global System for Mobile Communications (GSMA), a global association of telecommunications companies, the financial performance of the mobile industry is not sufficient to support its capital-intensive nature. This is due to several factors, especially high operational costs. The main reasons for this were rising diesel prices and high foreign currency demand due to contractual commitments for deployment in dollars.
In their financial reports for the end of 2023, both telecommunications companies highlighted the need to mitigate exchange rate risks to restore profitability. “We will continue to focus on reducing our exposure to currency volatility.” said Airtel Africa’s then CEO Olusegun Ogunsanya.
In the first half of 2024, MTN reduced its letter of credit (LC) balance to $100 million from $416.6 million in December 2023, thereby mitigating the impact of future naira devaluation and associated funding costs.
Karl Toriola, CEO of MTN Nigeria, said, “We have made significant progress in reducing the outstanding letters of credit (LC) US$ obligations, which contribute to the volatility in our earnings through forex losses.”
Airtel Africa also repaid its 5.35% senior secured notes due May 2024 at holding levels. “This bond repayment of $550m was made exclusively out of the cash reserves at the HoldCo and is a continuation of its strategy to reduce external foreign currency debt,” the company said in its 2024 first half financial report.
Sunil Taldar, Airtel Africa’s new CEO, said, “During the quarter, we fully repaid the outstanding debt due at the HoldCo, and we remain committed to further reducing foreign currency exposure across the Group to limit the impact of currency devaluation on our business.”
The telecommunications company’s profit after tax for the quarter ended June 30, 2024 was $31 million, mainly due to special derivatives and foreign exchange losses of $80 million.
The telecommunications division’s reliance on foreign exchange is due to the type of equipment required. “The telecoms industry, like many others in the country, is heavily reliant on FX for the procurement of essential equipment, infrastructure, and technology,” said Roseline Ogundokun, a lecturer at Landmark University’s School of Computer Science.

The lecturer stressed that the depreciation of the naira has put strain on telecom companies’ finances. In response, telecom companies are also reducing the dollar component of their operations.
For example, MTN has renegotiated its tower contracts. “It is important to say that tower contract renegotiation, supported by disciplined capital allocation, is very important in mitigating the impact of forex liberalisation and higher energy costs.” MTNN’s Chief Financial Officer Modupe Kadri said in 2023.
MTN’s Toriola said of the tower negotiations in the company’s H1 2024 report, “If successful, this will help mitigate macro risks affecting our business and support margin recovery.”
On August 7, 2024, MTNN announced that it had renegotiated its tower leases with IHS (Nigeria) Limited, INT Towers Limited, IHS Towers N Limited (together with IHS) and ATC Nigeria. The revised terms of the contracts have reduced the dollar-linked portion of the leases, which are now primarily naira-based.
Triola stressed that “The strides achieved in executing these interventions are encouraging and set the business up well to improve our profitability and negative net asset position.”
Taldar of Airtel Africa added: “We have initiated a comprehensive cost optimisation programme across the Group. We have already seen success in this project, with savings arising in network and distribution costs and continued opportunities as contract renegotiations continue. We expect sustainable savings to continue as the year progresses.”
A senior telecommunications manager, who declined to be quoted, said the company’s new strategy includes bulk purchases of equipment to hedge against currency fluctuations.
“We pay vendors ahead and lock down equipment at a constant price. The vendor may not deliver immediately, maybe because they cannot do so at the time, but at least we have locked it down and paid. For us, it is hedging against the volatility,” the manager said.
The manager also noted that the telco is localizing its solutions. “We attend tech events almost weekly, looking for people who develop things. We need developers who develop solutions. We are beginning to look internally and looking for products that we can use.”
The manager added that the industry is also learning lessons from other African countries and South America where currency devaluations have affected business.
Despite these cost measures, the telecommunications industry is pushing ahead with price hikes. ALTON recently said, “For a fully liberalised and deregulated sector, the current price control mechanism, which is not aligned with economic realities, threatens the industry’s sustainability and can erode investors’ confidence,”