MTN Nigeria Seeks N50bn In Debt Market To Cover Funding Gap

MTN Nigeria, the largest wireless operator on the continent, has revealed its plans to raise N50 billion in commercial paper to support its short-term working capital needs.

This move marks MTN Nigeria’s first return to the debt market this year, following four commercial paper issues last year, which raised a total of N375 billion.

In a recent statement to the Nigerian Exchange, the company stated that the issuance aligns with its strategy to diversify funding sources and stabilise its liquidity.

The decision comes amid rising financial pressures on MTN Nigeria. At the end of September, the company reported a significant working capital deficit, with current liabilities exceeding current assets by N1.5 trillion, representing a 240 percent gap. The balance sheet challenges date back to the end of the last fiscal year when financial constraints pushed the company’s equity into negative territory. This has since worsened, with shareholder funds standing at a deficit of N573.6 billion by the end of the third quarter—up from a N40.8 billion deficit a year earlier.

In its recent earnings release, MTN Nigeria outlined a series of initiatives to improve its financial position. Among these measures are regulatory-approved tariff adjustments, optimisations in capital expenditure, a reduction in United States (US) dollar exposure, and adjustments in tower lease contracts. These steps are part of a broader strategy to address the company’s negative capital position and bridge the working capital gap.

Despite the financial strain, MTN Nigeria’s credit ratings have remained stable. In August, GCR Ratings, a Moody’s affiliate, affirmed the operator’s national scale long and short-term issuer ratings of AAA and A1+, respectively. This rating extends to all existing senior unsecured bonds issued by MTN Nigeria, reflecting a level of confidence in the company’s debt repayment capability despite ongoing challenges.

The company’s share price, however, has underperformed significantly this year, dropping by 35.6 percent year-to-date. In contrast, the NGX 30 index, which tracks the top 30 companies by liquidity and market capitalisation on the Nigerian Exchange, has risen by 31.7 percent over the same period.

Just as MTN Nigeria seeks to shore up its capital base, industry watchers will be monitoring the effectiveness of its strategic adjustments in stabilising its financial footing and restoring investor confidence.