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83% of our 2023 FX losses are unrealized, they potentially can be reversed – MTN CFO

In a discussion with Uade Ahimie on Naijaonpoint’ Executive Couch, Modupe Kadri, the Chief Financial Officer of MTN Nigeria, emphasized that despite the substantial FX losses incurred in FY 2023, approximately 83% of that amount remained unrealized.

Kadri clarified that these losses were not in cash and suggested that if the Naira were to regain its value, there could be a reversal of these losses.

Kadri noted,

Furthermore, Kadri highlighted that the reported losses in the 2023 financial year by multinationals operating in Nigeria were indicative of a macroeconomic issue requiring governmental intervention.

Just like MTN Nigeria, Airtel Africa in its nine-month financial results reported a $748 million foreign exchange loss due to the devaluation of the Naira from N461/$ in June 2023 to N952/$ in December 2023.

Other multinationals were also affected by the Naira devaluation which resulted in sharp declines in their profit profiles in 2023.

For example, Nigerian Breweries reported a net loss of N153.3 billion on foreign currency transactions which resulted in a pre-tax loss of N145.2 billion in FY 2023.

When asked about the projected impact of the continued Naira devaluation on the company’s Q1 2024 financial results, Kadri noted that it’s too early to make projections however, he allayed fears about the company’s financial state in Q1 2024.

He noted that between 70 and 75% of MTN Nigeria’s operating expenses were from its tower contracts, and that payments for the tower contracts are made based on the applicable rates at the start of the quarter.

Thus, he noted that the tower contracts for Q1 2024 were paid at N905/$ which was the applicable exchange rate at the start of the year.

Answering the question about the group’s tax contributions despite the losses accrued. He highlighted that Nigeria’s tax system doesn’t recognize unrealized losses hence the group has to account for income taxes and VAT, which is a further addition to the group’s cost profile.

According to Kadri,

He added,

Kadri highlighted the new 7.5% VAT on tower leases which was contained in the Finance Act 2023, noting that this is “an additional 7.5% cost which we have to carry, and we can’t pass on to end-customers.

In its financial statement for FY 2023, MTN Nigeria reported a N2.47 trillion revenue, representing a 22.7% growth in revenue.

However, with an accrued net foreign exchange loss of N740.4 billion, the group recorded a pre-tax loss of N177.9 billion.

However, with an accrued net foreign exchange loss of N740.4 billion, the group recorded a pre-tax loss of N177.9 billion.

This loss led to a wipe out of the group’s shareholders’ funds as its accumulated loss now stands at N208 billion. As expected, the loss has impacted MTN’s ability to pay final dividends for 2023.

Kadri notes, “The focus for us right now is to ensure we fix the negative reserves”.

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