MTN Nigeria earns more but keeps less cash

MTN Nigeria is earning more and generating stronger cash flows, but retaining less cash. Its nine-month results show how dividend payouts, network investments, and debt repayments are drawing on the financial buffer of Nigeria’s largest mobile operator.

Profit after tax rose 55.3% to ₦1.17 trillion ($869.9 million) in the nine months ended 30 September 2026, while service revenue increased 23.7% to ₦4.59 trillion ($3.41 billion). Yet cash and cash equivalents on its balance sheet fell nearly 40%, from ₦632.5 billion ($470.3 million) in December 2025 to ₦381.0 billion ($283.3 million).

The decline does not mean MTN Nigeria is struggling to convert profits into cash. Net operating cash flow increased 48.2% to ₦2.31 trillion ($1.72 billion). Instead, the results reveal a growing capital-allocation trade-off as the company balances investment, debt repayment, and shareholder distributions against the need to maintain sufficient liquidity to absorb unexpected costs and economic shocks.

As Nigeria’s largest telecom operator invests to meet surging data demand, expand network capacity, and sustain service quality, its shrinking cash reserves could limit its flexibility to respond to rising operating costs, regulatory pressures, or economic shocks. The challenge is to sustain growth and reward shareholders without weakening the financial cushion needed to protect its operations and fund future expansion.

“Growth is increasingly volume-led, driven by more users, deeper data adoption, higher usage, and rising demand for home broadband, supported by continued investment in network coverage, capacity, and quality,” said Karl Toriola, CEO of MTN Nigeria. The company’s fintech business is also gaining traction, with core mobile money revenue up 102.2%. Revenue from its airtime and data credit service rose 78.5% quarter-on-quarter following its resumption under a multi-partner model.

MTN Nigeria also kept operating expenses growing slower than revenue, allowing earnings before interest, tax, depreciation, and amortisation (EBITDA) to rise by 36.8% to ₦2.62 trillion ($1.95 billion). Its nine-month EBITDA margin widened from 51.4% to 56.9%, reaching 58.7% in the third quarter as revenue growth translated into stronger operating profitability.

Lower financing costs provided an additional boost. Net finance costs declined 25.3% to ₦277.0 billion ($205.9 million), while naira appreciation contributed an ₦80.1 billion ($59.6 million) foreign-exchange gain. Although these gains supported earnings, their contribution may fluctuate with exchange-rate movements, making them a less dependable source of growth than underlying operating performance.

Michael Ajukwu, a member of the board, Karl Toriola, CEO of MTN Nigeria, and Ernest Ndukwe, Chairman of MTN Nigeria at the company’s annual general meeting this year. Image source: MTN Nigeria.

The cash flow statement explains why stronger operating performance did not produce a larger cash balance.

MTN Nigeria generated ₦2.31 trillion ($1.72 billion) in net operating cash flow but used ₦1.33 trillion ($988.8 million) for investing activities and ₦1.22 trillion ($907.1 million) for financing activities. Those combined outflows exceeded operating receipts.

Dividends were the largest financing outflow. The cash flow statement records ₦859.7 billion ($639.2 million) paid to shareholders, ₦188.5 billion ($140.1 million) in borrowings repaid, and ₦158.6 billion ($117.9 million) in lease principal repayments.

Investment also absorbed substantial cash. Payments to acquire property and equipment totalled ₦1.00 trillion ($743.5 million), with an additional ₦78.1 billion ($58.1 million) spent on intangible assets. MTN Nigeria also made net purchases of financial investments and spent ₦76.1 billion ($56.6 million) on prepaid road investment tax credit costs.

These cash payments should not be confused with management’s reported capital expenditure excluding leases of ₦864.8 billion ($643.0 million). The measures differ: the cash-flow statement tracks payments during the period, while the capital-expenditure metric records investment on a different accounting basis.

Nor did all the reduction in cash leave MTN Nigeria’s pool of financial assets. Current investments increased from ₦162.3 billion ($120.7 million) to ₦330.7 billion ($245.9 million). Combined cash and current investments therefore fell from approximately ₦794.8 billion ($590.9 million) to ₦711.7 billion ($529.1 million)—a decline of about 10.5%, substantially less than the decline in cash alone. These investments are not the same as immediately available cash, but they matter when assessing liquidity.

The company also reported free cash flow of ₦1.17 trillion ($869.9 million), up 57.5%. That is its defined performance measure, not the amount left after dividends, debt repayments, and other financing outflows.

MTN Nigeria’s balance sheet contains clear signs of improvement. Total borrowings declined from ₦527.7 billion ($392.3 million) in December to ₦333.3 billion ($247.8 million) in September, while shareholders’ equity increased 53.8% to ₦843.9 billion ($627.4 million). Management says borrowings are entirely naira-denominated and fixed-rate, reducing currency and floating-interest-rate exposure on that debt.

However, its reported net-cash position narrowed from ₦104.8 billion ($77.9 million) to ₦47.7 billion ($35.5 million). Short-term obligations also increased: current liabilities reached ₦2.64 trillion ($1.96 billion), while current assets stood at ₦1.19 trillion ($884.8 million), widening the working-capital deficit to approximately ₦1.46 trillion ($1.09 billion).

That gap requires context. Not every current liability represents an immediate cash demand: contract liabilities include payments received for services yet to be delivered. Strong recurring operating receipts also help fund obligations as they fall due. Nevertheless, tax payable rose to ₦710.3 billion ($528.1 million), and current lease liabilities increased to ₦350.7 billion ($260.7 million). Total lease liabilities stood at approximately ₦2.46 trillion ($1.83 billion), a substantial commitment beyond conventional borrowing.

The risk, therefore, is less about weak earnings than about diminishing financial flexibility. MTN Nigeria must continue expanding network capacity while meeting tax and lease obligations and sustaining shareholder returns. Rising energy costs and exchange-rate volatility could make that balancing act more difficult.

The pressure is already evident in Nigeria’s diesel market. A Priceandpromo survey put the average diesel price at ₦1,899 per litre on 22 September, up 91.8% from its 13 January baseline. While this is not a measure of MTN’s contracted fuel costs, it highlights the inflationary pressures facing diesel-dependent telecom infrastructure.

For MTN Nigeria, these costs feed into tower contracts whose energy component is indexed to the previous quarter’s average Lagos ex-depot diesel price. This creates a lag between market price increases and their impact on operating expenses. Energy accounts for an estimated 28–30% of the company’s operating costs, making sustained fuel inflation a significant risk to profitability.

Management estimates that an average ex-depot diesel price of ₦2,000 per litre in the second half of the year could reduce its full-year EBITDA margin by 1.8–2 percentage points. This is a sensitivity estimate, not a reported loss. In Q3, cost efficiencies, Value Added Tax (VAT) input claims, and naira appreciation helped offset higher diesel-linked tower costs. But if fuel prices remain elevated or the naira weakens again, those gains could diminish, putting further pressure on margins and leaving less cash available for network investment and shareholder distributions.

Fintech presents a separate recovery challenge. Although core mobile-money revenue more than doubled, total fintech revenue fell 25.9% following the earlier suspension of airtime-and-data credit services. Rebuilding that revenue stream remains a priority, even as the wider business strengthens.

MTN reaffirmed its medium-term revenue-growth and margin guidance, signalling confidence in its outlook. The next test, however, is not simply whether earnings rise, but whether the company can fund growth, meet its obligations, and reward shareholders while preserving sufficient liquidity to withstand further shocks.

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