Rally in Nigerian currency buoys MTN share price

MTN stock has built up steam JSE over the past month after losing more than a quarter of its value in 2023. It is up 12% on the month, in line with positive momentum in Nigeria’s naira against the dollar.

Over the years, MTN’s share price has been highly correlated to the health of the Nigerian economy, due to its largest business being in that country. This dynamic has mainly been driven by the price of oil, Nigeria’s main export commodity. MTN’s last peak at R203 a share came about the same time that oil reached its own high in early 2022, soon after Russia invaded Ukraine.

But 2023 brought with it a new dynamic to shape market perception.

Nigeria’s new forex policy, announced in June 2023, was a major departure from that of the previous regime that was characterised by multiple exchange rates and tight government controls.

Under the new policy, the value of the naira is determined by market forces rather than by the country’s central bank. The local currency is thus now free floating, and its value can fluctuate based on supply and demand.

The naira lost more than half its value, pulling down MTN’s full-year earnings for 2023.

MTN’s share price fell from its 12-month high of R144 in June, to R82.10 by early March.

Over the past month, the naira’s fortunes have turned, with the Nigerian currency 27% firmer against the dollar. For the same period, MTN is up 12%, ending Friday at R97.06.

This puts a R182.9bn market value on Africa’s largest mobile operator by subscribers. 

The group, Nigerians and investors will be hoping for this momentum to continue.

Asked when the situation in Nigeria would normalise, MTN’s finance chief, Tsholofelo Molefe, told Business Day: “It’s difficult to tell. When we talk to banks, which we do all the time, they thought that the Naira would find its level at 1,000 but it shot up to 1,600 [to the dollar]. Over the past weeks, it has come down to 1,400. We don’t know where it’s going to land.

“We remain confident that it will find its way,” she said. 

Remains resilient

At 7pm on Friday, the dollar was worth 1,244 naira.

Considering the circumstances, MTN’s overall business remained “resilient” for the full year to end-December 2023.

Total subscribers increased to 295-million across MTN’s 19 markets. High demand for data and fintech services caused the number of active data subscribers to grow more than 9% to 150-million, half the total subscriber base, and active mobile money users were up 5% to 72.5-million.

Group service revenue grew 6.9% to R210.1bn. In constant currency, this growth stood at 13.5%.

Earnings before interest, tax, depreciation and amortisation (ebitda) — before one-off items — was down 0.5% to R90.5bn.

MTN is pushing forward with growth initiatives such as its plan to separate its fibre infrastructure business, having acquired assets in Zambia, and moving forward a R6bn building project between East and West Africa.   

The group is hoping to replicate the success in its fintech unit and capitalise on interest from finance houses in its telecom infrastructure businesses.

In January, payments giant Mastercard invested R3.8bn in MTN’s fintech business as part of a plan to partner with industry experts that will help to grow that new revenue line. The transaction values the unit at $5.2bn (R97bn). 

The group has long argued that the value of such assets is not truly reflected in its share price. 

“MTN’s separation of its fibre business through Baobab and the success of its fintech unit offer promising growth prospects,” said Petri Redelinghuys, founder of Herenya Capital.

Redelinghuys said the fibre business could diversify revenue streams by meeting the demand for high-speed internet, while the fintech unit has driven revenue and financial inclusion.

“Both segments face challenges like regulatory obstacles and market competition, with their impact determined by MTN’s strategic execution and market dynamics,” said Redelinghuys.

For the week, MTN’s share price gained 3.5%.

gavazam@businesslive.co.za