MTN Nigeria Communications PLC has announced its intention to raise N50 billion through the issuance of commercial paper (CP) under its N250 billion Commercial Paper Issuance Programme. The Series 11 and 12 CP issuance aims to enhance MTN Nigeria’s short-term working capital and diversify its financing base, as stated in a notification to the Nigerian Exchange Limited and the investing public.
This latest issuance is part of MTN Nigeria’s strategy to leverage the debt market for flexible funding to meet immediate financial needs, building on a series of previous CP issuances. The funds raised will support operational and growth requirements as the company works to expand its infrastructure, improve service delivery, and respond to the growing demand for telecommunications and digital services across Nigeria.
MTN’s financial statement as of September 2024 indicates a concerning negative working capital of approximately N1.49 trillion.
The Rationale Behind the CP Issuance
MTN Nigeria’s N250 billion CP program enables the issuance of multiple CP series to address cash flow demands and service short-term debt without relying heavily on long-term financing. This strategy not only enhances financial flexibility but also allows MTN to manage interest costs and adjust its debt profile according to operational cash flow—a critical consideration for a company with substantial external loans.
By diversifying its financing sources, MTN Nigeria reduces its dependence on bank loans and maintains a balanced approach to short- and long-term debt. This strategy strengthens MTN’s liquidity position and equips the company to navigate the economic challenges present in Nigeria’s volatile business landscape. Although specific terms for Series 11 and 12 notes are yet to be disclosed, further details are anticipated in the coming weeks.
Addressing Short-Term Loan Obligations with CP
Currently, MTN Nigeria carries an external loan portfolio of around N1 trillion, with N522.3 billion classified as short-term loans. The frequency of its CP issuances indicates a deliberate approach to manage these short-term obligations. By raising additional funds through the upcoming Series 11 and 12 CPs, MTN Nigeria aims to meet immediate working capital needs while alleviating part of its short-term loan burden.
In December 2023, MTN Nigeria successfully raised N72.1 billion through a CP issuance, followed by an N52.9 billion issuance in November 2023, both directed towards addressing similar working capital requirements. This strategy highlights MTN Nigeria’s commitment to utilizing the debt market for operational liquidity and supporting its substantial loan obligations.
