MTN Nigeria Communications Plc and Airtel Africa have aggressively reduced their foreign debt exposure, repaying $1.12 billion between March 2024 and March 2025 in a move to mitigate foreign exchange (FX) risk and return to profitability.
But the pivot to local borrowing has come at a cost as high domestic interest rates inflate finance costs. As of March 2025, foreign currency loans made up just 23 percent of MTN Nigeria’s debt portfolio, with domestic loans taking up the rest. On the other hand, Airtel Africa now holds 93 percent of its loans in local currencies.
Despite these adjustments, Airtel Africa, which operates in 14 countries, saw its net debt rise by 53 percent to $5.36 billion from $3.51 billion in the same period a year earlier. MTN Nigeria’s gross debt stood at N921.36 billion, a modest drop from N972.92 billion.
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High inflation, MPR weigh heavily
Double-digit inflation has kept Nigeria’s monetary policy high. Headline inflation rose from 29.90 percent in January 2024 to 34.80 percent by December. To tame this, the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR) from 18.75 percent to 27.25 percent within the same year.
“Our decision to raise the MPR to 27.25 percent was a bold move,” said Olayemi Cardoso, CBN governor. “While painful for borrowers, it was necessary to curb excess liquidity and control inflation.”
The MPR is the rate at which the CBN lends to commercial banks. Commercial banks then use this rate as their benchmark rate for their lending. Inflation currently stands at 23.71 percent after the National Bureau of Statistics (NBS) rebased the inflation basket at the end of 2024, while MPR remains at 27.5 percent.
The high interest rate has resulted in higher finance costs for both telcos.
“Increased OpCo market debt and the shift of foreign currency debt to local currency debt, which carry a higher average interest rate, also contributed to an increase in finance cost in the current period,” Airtel said.
MTN Nigeria added that net finance costs jumped 44 percent, driven by higher interest rates on borrowings, lease liabilities tied to naira depreciation, and new tower lease extensions.
Tony Emoekpere, president of the Association of Telecommunications Companies of Nigeria (ATCON), said telcos are structurally required to borrow due to the capital-intensive nature of the industry. “There’s always something to improve with technology,” he said.
While he welcomed the shift to domestic lenders, he admitted that “it’s good for the economy.” He stressed the need for lower borrowing costs. “We must get to single-digit interest rates if this is to be sustainable.”
Despite this increase in finance costs, Oladayo Adenubi, research analyst, noted that even with the high domestic interest rates, telcos are getting cheaper credit domestically than in dollars with FX risk.
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How FX losses sparked shift
The shift to local borrowing was triggered by the FX losses suffered in 2023 following the CBN’s unification of Nigeria’s exchange rate, which caused the naira to plunge from N471/$ to N1043.09/$ by December 2023, and further to N1583.99/$ by May 21, 2025.
MTN and Airtel lost $1.56 billion in 2023 due to FX revaluation. MTN Nigeria posted a M137 billion loss after tax, the first since its 2019 listing, while Airtel Africa recorded an $89 million loss for the full year ending March 2024.
To stem the tide, both companies slashed their dollar-denominated obligations, with MTN reducing its outstanding letters of credit from $416.6 million at the end of 2023 to just $1.4 million in Q1 2025.
At the end of 2024, Modupe Kadri, MTN Nigeria’s chief financial officer, noted that as of December 2023, the telco had an overall FX exposure of $1 billion, which was reduced to about $300 million by the end of 2024.
Airtel Africa, with 58.59 million Nigerian subscribers, also paid down $702 million in foreign currency loans. These moves helped to restore profitability, Airtel Africa reported a $328 million profit after tax in the full year ending March 2025, and MTN Nigeria returned to profit with N133.7 billion in Q1 2025.
Telcos getting creative
Telcos are getting creative as they continue to explore the domestic market. MTN has turned to the commercial paper market, issuing N189.56 billion under a N250 billion programme at rates of 23.88 – 24.20 percent, slightly below prevailing interest rates.
For instance, MTN has issued bonds and commercial papers, with interest rates much lower than prevailing interest rates. It has issued N189.56 billion under its N250 billion commercial paper issuance programme, with interest rates around 24.20 percent and 23.88 percent.
“Commercial papers (CPs) help them to close their working capital funding gaps, but they don’t really do much in terms of needing long-term financing, which their capital-intensive business model requires,” noted Adenubi.
“An efficient capital mix for telcos will eventually require bonds, equity, and long-term bank loans. Development finance institutions can also play a role depending on the nature of investments.”
Despite this increase in local loans, GSMA, the global body for telcos, believes that mobile service providers’ revenue must be able to cover their operating costs and support their level of capex in the medium term.
“Last year, we burned about 130 percent of the cash we earned, so we were borrowing to keep the network alive,” said Karl Toriola, MTN’s CEO. “Now, with stability in the naira and better pricing, we can cover our bills and begin investing again.”
