Doing business in Nigeria is tough. While we say this all the time, nothing makes it more real than the release of annual financial reports. Take MTN Nigeria’s latest report, it shows the bruising realities faced by businesses in the country today.
Take a look at the numbers. MTN Nigeria generated a staggering ₦3. 36 trillion in revenue in the year ended December 31, 2024, up 36.03 per cent from N2.47 trillion in 2023. Yet, it is regarded as a bad year, because it reported a loss of N400.4 billion after tax for the financial year. This was due to a net foreign exchange loss of N925.36 billion from ₦740.43 billion in 2023.
The upshot is that this financial turmoil shaved 24. 2 per cent off MTN Nigeria’s market capitalisation, dragged down its share price to ₦200, and sent shareholders into shock. I know, I’m a small-time shareholder and it hurts.
The sad news is that in response, the company has decided not to declare a final dividend for the year which begs the question: Should MTN Nigeria pay dividends despite its losses?
If we take a step back, we can see that doing business in Nigeria has been extremely challenging over the last three to four years. The country’s continued economic instability, with inflation rates of over 30 per cent, devaluation of the currency and erratic foreign exchange policies, has put tremendous pressure on companies. For MTN Nigeria, which has substantial dollar-denominated obligations, these economic headwinds have eroded capital at an unprecedented pace.
But this is not just an MTN Nigeria problem, it is a telecoms industry-wide problem. The entire industry is facing rising costs of doing business. Diesel to power base stations has become very expensive. Infrastructure costs remain high, and tower lease agreements are highly sensitive to forex movements. Regulatory uncertainties, including unresolved issues such as the USSD debt dispute with Nigerian banks, continue to dampen financial performance. And of course, there are the perennial issues around the right of way and multiple taxation.
Sources at the company said that, in light of these harsh realities, the board of MTN Nigeria decided against paying a final dividend for the 2024 financial year. This decision, while understandable, will be a tough pill for investors to swallow, given that dividends are a form of return on investment, and investors rely on them.
The reality is that dividend payments are a key factor in investor confidence. By not paying out dividends, MTN Nigeria risks alienating shareholders and stifling the enthusiasm in the stock market. Experts believe that this decision may have played a role in the company’s share price drop.
However, paying out dividends when losses are being recorded would raise governance issues. Critics say paying out dividends when the company is in the red would erode its balance sheet and reduce its liquidity for expanding its business and regaining profitability.
But there is a compelling counterargument to be made. MTN Nigeria’s operating profit of ₦778. 24 billion was still up by 0. 6 per cent from 2023. This confirms the strength of its core business in the face of external financial pressures. A modest dividend payout, perhaps at a lower percentage, would be a reassuring signal to investors without compromising long-term viability.
The firm’s focus on network expansion and digital services (including its MoMo Payment Service Bank) is well-placed to underpin future growth. Yet the company should push hard for more local currency-denominated contracts to reduce forex exposure. Its renegotiation with IHS Towers to cut dollar-based lease payments is a good example. The deal with ATC is naira-based.
In addition, the government needs to take urgent steps to stabilise the exchange rate and tackle inflation as businesses cannot operate in an environment of such economic uncertainty. Clearer regulation and policy consistency are also needed, so companies like MTN Nigeria can build long-term growth plans and not be surprised by sudden policy changes.
The bottom line is that MTN Nigeria’s financial woes are indicative of the broader economic challenges affecting businesses in Nigeria. The decision to freeze dividends is a sound one in the short term, but the company will need to tread carefully to balance financial recovery with retaining investor confidence. A well-thought-out dividend policy, combined with aggressive cost-cutting and revenue diversification efforts, will be critical in weathering this storm.
In the end, Nigeria’s business environment needs urgent structural reforms. Without them, even the most resilient corporations will continue to struggle, and shareholders will bear the brunt of the losses.
Eromosele, a corporate communication professional and public affairs analyst, wrote via elviseroms@gmail.com