MTN Nigeria looks ordinary these days. It used to be a rainmaker, making tons of money for men and women. But 2023 happened along with many policy changes, and MTN has come down. Yes, that exceptionalism has been taken out and this company is normalized. Why not? In Nigeria, gravity is powerful.
Good People, MTN is scaling loses at an unprecedented level: “MTN Nigeria, Africa’s largest mobile operator, reported a significant loss of N575.69 billion in Q1 2024 due to the devaluation of the Nigerian Naira and increased energy costs, resulting in a net foreign exchange loss of N656.3 billion… MTN Nigeria is pushing for a tariff hike to address the financial difficulties caused by high-interest rates and the ongoing naira crisis.”
There is one challenge we have in the land now: inflation will continue to scale because the government will continue to print money (Ways and Means is back), and the reason that will happen is straightforward. Nigeria did not think of the implications of the removal of fuel subsidies and the floating of the currency before doing them. So, we’re learning on the fly.
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In other words, Nigeria did not consider that by having those policies, it could reduce corporate tax revenue (excluding banking sector) by more than 40%. So, even if we save money on fuel subsidies, we will lose money on corporate taxes, and if we do not manage both well, we cannot balance the budgets. Today, MTN which used to write billions as profits is now in red. Add other companies, you will get the idea why the government has to print money via Ways and Means.
“The Federal Government of Nigeria received an additional N3.8 trillion in what appears to be fresh Ways and Means Borrowing in the last six months of 2023. …This is despite news reports noting that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, which suggest President Bola Tinubu’s?government has not borrowed money from the CBN.” – Nairametrics.
Nigeria will print money because it needs to find ways to make up for these corporate losses, and as it prints the money, it will also offset the apex bank’s monetary policy of rate hike which is done to tame the economy, hoping to cool inflation. But with Ways and Means (flooding the economy with magic money) it will cancel out the impact of those hikes by the Central Bank of Nigeria with one result: inflation stays high and misery scales in the land.
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Those with shallow minds will still think that MTN recording losses is good thing, because in their twisted minds it’s a ‘foreign’ company. What they forget is that MTN writes one of fattest cheques by way of taxes in the land, and roads the company was meant to construct would now be funded by who? Nigeria’s abysmal economic situation is a combination of witchcraft and ineptitude. Here is a country where you see miscreants rejoice that companies with foreign links are losing money, it’s both vile and misguided to think that way.
On the one hand, the economic managers will claim to be fighting inflation, and on the other hand, they will be printing money to paper over the cracks. The level of damage inflicted in this country in the last 11 months is such that every argument to defend the choices appears stupid, partly because certain things were never carefully thought through, before they were unleashed. For the uninitiated, they can ask, what other options? Well, the answer had been overtaken by events, because part of the options could entail having a completely different set of people running things. So the responsibility of finding answers falls squarely on the current managers, and it cannot be outsourced or explained away.
Resolving the issue of currency inflation affecting MTN NG requires a multi-faceted approach involving both the company and government. Here are some potential steps:
1. Hedging Strategies: MTN NG can use financial instruments like currency derivatives to hedge against currency fluctuations. This can help mitigate the impact of currency inflation on its financial performance.
2. Cost Management: The company can focus on cost management strategies to offset the effects of inflation. This could involve renegotiating contracts with suppliers, optimizing operational efficiency, and exploring ways to reduce expenses.
3. Diversification: Diversifying revenue streams can help MTN NG reduce its reliance on a single currency or market. This could involve expanding into new markets, offering new products or services, or investing in alternative revenue sources.
4. Government Collaboration: MTN NG can work closely with the government to address underlying macroeconomic issues contributing to currency inflation. This could include advocating for policies that promote economic stability, such as fiscal discipline, monetary policy coordination, and structural reforms.
5. Long-Term Planning: Developing long-term strategic plans that account for currency inflation and economic volatility can help MTN NG better navigate uncertain market conditions. This could involve scenario planning, risk assessment, and resilience-building measures.
6. Engagement with Stakeholders: MTN NG can engage with various stakeholders, including investors, regulators, customers, and employees, to communicate its strategy for managing currency inflation and building resilience against economic shocks.
By implementing these strategies and collaborating with relevant stakeholders, MTN NG can improve its resilience to currency inflation and position itself for sustainable growth in the long term.
Thanks so much Ayo for adding great value to this discussion. Very appreciated.