Peter Takaendesa, head of equities at Mergence Investment Managers.

While the Nigerian economy's volatility continues to have an impact on MTN Group results, an investment analyst believes there are green shoots to be found for Africa's largest telecoms company.

Peter Takaendesa, head of equity at Mergence Investment Managers holds the opinion that price increases will boost profitability, while revised tower lease terms should limit the impact of future naira devaluations.

Takaendesa delivered this assessment in response to MTN Group's 2024 performance, which saw naira depreciation force the business to an annual pre-tax loss of $243 million.

During the period under review, Nigeria experienced persistent dollar shortages, prompting officials to weaken the naira as part of the government's efforts to stabilise the currency and encourage investment.

Combined with rising inflation and interest rates, this has increased operating costs and pushed up MTN Nigeria's pre-tax loss by more than 200% to 550.3 billion naira ($355.76m).

Takaendesa responded to the results by stating that the telco's circumstances will improve.

He explained: “Revenue growth will remain strong in Nigeria, driven by both the price increase and continuing data traffic growth, while fintech (revenues) will add meaningfully to this over time.

“If there is no further material devaluations of the naira and no major negative regulatory issues in Nigeria over the mid-term, MTN will have a strong operational recovery and resume dividends upstreaming from Nigeria.”

According to Takaendesa, this is critical for the investment case over the mid-term.

Turning to fintech, he said overall the division is not yet contributing enough to offset the impact of currency devaluations although it is likely to be a growth driver over the long term.

“In a nutshell, MTN’s management team is largely executing well operationally, but there are a lot of macro and regulatory shocks that are beyond their control,” said Takaendesa.