MTN Nigeria's often impressive profit margin is facing threats on two fronts as earnings are hit by a weak naira and a tax demand threatens to remove tens of millions of dollars from its balance sheet.
The deregulation of forex management in Nigeria in June 2023 led to a 68.5% increase in the exchange rate from N461/US$1 in December 2022 to N777US/$1 by the end of September, resulting in greater business costs, and hitting recently announced MTN Nigeria earnings for the nine months ending 30 September.
Although MTN Nigeria still seems to have delivered a strong commercial performance in the period under review, the significant movement in the exchange rate since the liberalisation of the forex market resulted in higher forex losses with a knock-on effect on net finance costs, up 174.4%. Due to this, profit before tax (PBT) declined by 42.0%. It would have risen slightly without the forex loss.
That, however, is not the only issue faced by MTN Group, Africa’s largest telecoms company. After facing a court order to pay US$72.6 million in overdue taxes, as we reported recently, it now plans to challenge that order.
The order was issued last week by Nigeria's Tax Appeal Tribunal (TAT) in Lagos. TAT says the amount is for unpaid taxes between 2007 and 2017, though it is lower than the amount originally requested before MTN Nigeria appealed.
Having reviewed this outcome and considered input from tax and legal consultants, MTN Nigeria says it has resolved to appeal the TAT’s decision.
However, we may have to wait to hear a precise strategy. Quoted in ITWeb Africa, Karl Toriola, MTN Nigeria CEO, says: “The company will issue a separate and comprehensive statement articulating its position on the matter.”