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There are strong indications that the Nigerian unit of Africa’s biggest telecoms operator, MTN may embark on a tariff increase exercise as well as implement a cost-cutting regime. This is part of efforts to restore the company’s profitability and strengthen its balance sheet after the group company reported a slump in annual profit on Monday.

According to reports, MTN is working with regulators across several markets, including Nigeria, to get approval to increase tariffs for voice and data.

“Given our expense profile in Nigeria, we need some tariff increases to mitigate the cost of running the networks. Our focus is to work with regulators for tariff increases in voice and data as there haven’t been any increases for quite some time in that market,” MTN Group CEO, Ralph Mupita told the press in a chat yesterday to discuss the group’s 2023 financial results.

The challenging operating environment in 2023, marked by rising inflation, currency devaluation, and foreign exchange shortages, posed significant headwinds for MTN Nigeria. Geopolitical disruptions and cash shortages in Q1 compounded the difficulties, with a redesign of the naira exacerbating the situation.

In addition, Nigeria’s inflation rate rose by 28.9% in December 2023, the highest in 18 years, with an average rate of 24.5% throughout the year. These factors contributed to the depletion of retained earnings and shareholders’ funds to a negative N208.0 billion and N40.8 billion, respectively.

The South Africa-headquartered company said its headline earnings per share (HEPS) – one of the main profit measures – fell by 72.3% to 315 cents in 2023 from a restated 1,137 cents a year earlier. According to the company’s report, the loss is owing to a sharp devaluation in the Nigerian naira, which pushed MTN Nigeria, the group’s biggest business, to a loss after tax of 137 billion naira ($101.48 million) and a negative equity.

“Our view is that if we have two-thirds of inflation as a tariff increase in the next two to three years then it’s a good idea. We will supplement that with cost-cutting initiatives and efforts to minimise our foreign exchange risk”, the CEO added.