MTN Nigeria Communications Plc plans to raise N50 billion through its latest commercial paper (CP) issuance, as part of its N250 billion CP Issuance Programme.
This Series 11 and 12 issuance, officially announced to the Nigerian Exchange Limited and the investing public, aims to bolster MTN Nigeria’s short-term working capital, offering a simplified approach to meet the company’s immediate financial needs.
Issuing commercial papers aligns with the telecom giant’s goal of tapping into the debt market as a more flexible funding source. This allows MTN to manage short-term financial obligations without fully relying on long-term loans, balancing its capital structure.
The funds raised are intended to drive MTN’s operational goals, including expanding its infrastructure and meeting the growing demand for telecommunications and digital services across Nigeria.
According to MTN Nigeria’s latest financial disclosures as of September 2024, the company faces negative working capital estimated at around N1.49 trillion. With its N250 billion CP programme, MTN has the flexibility to issue commercial papers in series, which provides a cost-effective means of addressing its working capital requirements.
This method allows MTN Nigeria to manage its cash flow efficiently, helping to offset interest costs while catering to short-term debt needs. For MTN, which has some external loans, this approach provides greater agility to withstand Nigeria’s economic fluctuations and high inflation rates.
Currently, MTN holds an external loan portfolio of approximately N1 trillion, with over half of this, around N522.3 billion, in short-term loans. In issuing the Series 11 and 12 commercial papers, MTN intends to address these short-term liabilities more effectively, thereby reducing its reliance on traditional bank loans.
This diversification in funding channels will support MTN’s liquidity and also strengthen its financial footing in a challenging economic environment.
Previous CP issuances by MTN highlight a consistent strategy to shore up working capital. In December 2023, MTN raised N72.1 billion through a commercial paper issuance, which followed a N52.9 billion issuance the previous month.
These underline MTN’s reliance on commercial papers to secure liquidity for operational costs while addressing its short-term debt obligations.
Further details on the terms and conditions of the Series 11 and 12 commercial papers are expected soon, but MTN’s recent financial focus provides insight into the company’s performance. After a series of losses over three quarters, MTN reported a profit after tax of N4.13 billion in Q3 2024.
However, high inflation and the ongoing depreciation of the naira have impacted its operational expenses, underlining the importance of this commercial paper issuance in sustaining the company’s stability amid an unpredictable business climate.
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