Nigeria and Malawi’s Currency Devaluation Led Airtel Africa Plc to a Loss of $1.7 Billion

Recent news from Nairametrics shows that Airtel Africa Plc, also known as the second-largest telecommunications firm in Nigeria, has reported a negative downturn in revenue due to the devaluation of currencies in places with many operations. Nigeria and Malawi have been reported to be the countries that led to this decline. The devaluation of currencies led to a loss of $1.7 billion in derivatives and foreign exchange (FX) for the fiscal year ending March 31, 2024.

Airtel's financials in reported currency tell another story, even though the telecom company's service revenues show significant growth when measured in constant currency. Overall, they were reported to increase by 20.9% and climbed to 23.1% in the fourth quarter.

The company also saw a 5.3% decline in its group revenue, which settled at $4,979 million, and a 5.7% decline in EBITDA, which settled at $2,428 million. These figures reflect the serious effect of the Nigerian Naira and Malawian kucha's devaluation against the US dollar.

Airtel's financial results were significantly impacted by the sharp depreciation of the Nigerian Naira, which fell from 461 to 1,303 per US dollar during the year. As a result of the devaluation, the company's reported revenue decreased by $1,042 million, and its EBITDA decreased by $554 million.

The Naira's devaluation contributed $770 million of the $1,259 million in derivatives and foreign exchange revaluation losses, greatly increasing the financing costs to $1,703 million.

In his statement, Airtel CEO Olusegun Ogunsanya pointed out the effectiveness of the company's what he classified as a "strategic approach" in mitigating the adverse effects of currency fluctuations and driving revenue growth.

He said,

"The consistent deployment of our 'Win with' strategy supported the acceleration in constant currency revenue growth over the recent quarters, reducing the impact of currency headwinds faced across most of our markets. This strong revenue performance reflects not only the opportunity inherent across our markets but also the resilience of our affordable offerings despite the inflationary pressure many of our customers have experienced."

The CEO clarified the company's operational focus and mentioned the strategic importance of financial caution and the crucial role that investments in technology and distribution play in enabling growth.

Addressing financial strategies, he pointed out efforts to minimise risks associated with currency devaluation, including reducing US dollar debt and maintaining sufficient cash reserves to cover outstanding debts.

"Furthermore, our rigorous approach to de-risking our balance sheet and capital allocation priorities has materially reduced the currency devaluation risks to our business," he affirmed.

Regarding operational highlights, Airtel reported great performance in the money and mobile services segments. Mobile services revenue grew by 19.4% in constant currency, driven by a 29.2% surge in data revenues and an 11.9% increase in voice revenue.

Airtel Nigeria reported that its currency EBITDA declined by 26.3% to $811 million, while its constant currency EBITDA increased by 30.9%, increasing the EBITDA margin to 54.0% by 226 basis points.