The devaluation of the naira last year took a big bite out of the revenues of two of the country’s biggest telecommunications companies.

Airtel and MTN Nigeria lost N1.29 trillion to the devaluation. MTN posted a loss after tax of N137 billion for the 2023 financial year, although its service revenue grew by 22.4 percent to N2.5 trillion.

Airtel recorded a significant drop in revenue for the nine months ended December 31, 2023. The telco’s revenue fell by 21.96 percent to $1.24 billion from $1.59 billion as the fall in the naira affected its conversion rates in Nigeria. In constant currency, the firm’s revenue grew by 22.7 percent.

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“In reported currency, revenues declined by 21.9 percent to $1,237 million on account of the 64.7 percent average devaluation of the Nigerian naira,” Airtel said in its financial statement

Airtel’s voice revenue grew by 16.3 percent in constant currency in the nine months ended December 2023, driven by both customer base growth of 5.6 percent and voice average revenue per user growth of 10.2 percent. Its data revenue grew by 29.8 percent in constant currency too.

MTN’s voice revenues increased by 9.7 percent in 2023, and data revenues rose by 39.8 per cent.

Nigeria removed the rate cap on its local currency in June 2023, allowing for the free float of the naira against other foreign currencies. This was meant to close the gap between the official and parallel rates of the naira and incentivise foreign investment inflow into the country.

The naira has since recorded a steep decline. It fell from N461/$ to N907/$ in 2023.

Airtel’s foreign exchange losses were largely derivatives and foreign exchange losses

It said: “A significant portion of this devaluation occurred in June 2023 following the Central Bank of Nigeria (CBN) announcement on changes to the operations in the Nigerian foreign exchange market, which contributed to a $447 million loss (reflecting the revaluation impact of US Dollar balance sheet liabilities and derivatives) and was presented as an exceptional item

“The naira continued to devalue post June 2023 and faced a further significant devaluation in Q3’24 from 777 per US Dollar to 952. This resulted in a further loss of $214 million in Q3’24, which has not been presented as an exceptional item.”

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Airtel Africa’s profit after tax for the period was $2 million in the period because of significant foreign exchange headwinds, particularly a $330 million exceptional loss after tax following the devaluation of the naira in June 2023 and the Malawian kwacha in November 2023.

The devaluation of the naira in 2023 resulted in a net forex loss of N740.4 billion for MTN. This was reflected within net finance costs and resulted in a reported loss after tax of N137.0 billion, its first in over six years. The firm disclosed that it would have made N348.7 billion without its net forex loss as profit after tax

The telco noted that its operations are exposed to foreign currency volatility on its operating and capital expenditures. It explained that the most significant exposures relate to tower lease costs, comprising 45 – 50 percent foreign currency exposure in its operating expenses in 2023.

Currency devaluation impacted the telco’s operation greatly. In its full year financial report for 2023, Karl Toriola, MTN Nigeria chief executive officer, said: “This development contributed meaningfully to the upward pressure on the cost of doing business in Nigeria, and for MTN Nigeria in particular, significantly increased the costs in relation to our tower leases.”

The telco did not declare a dividend for 2023. MTN Group (parent company of MTN Nigeria) said in a profit warning, “The financial result has . . . been negatively affected by the sharp devaluation in the naira against the US dollar impacting MTN Nigeria’s financials, despite the operating company’s solid underlying operational performance.”

2023 was a terrible year for businesses, with many declaring losses due to the naira’s devaluation. Both telcos remain bullish about Nigeria, expecting to pull through with their respective growth strategies. They, however, expect a tough 2024