MTN Challenges New Tax Demand by Nigerian Authorities Amid Lower Profits

Africa's biggest wireless carrier, MTN, announced plans to challenge a fresh tax demand by Nigerian authorities. The development comes in the wake of the company’s confirmed unrealized foreign exchange losses—truths that have led to decreased profits and a drop in the company's shares.

MTN, in a statement issued on Monday, admitted to additional unrealized foreign exchange losses on outstanding matured trade obligations and a rise in net finance costs for the half-year running through June. The company acknowledged prior errors in measuring these figures. It consequently resulted in a 13% drop in the MTN Group’s earnings per share for the first half compared to what was initially reported.

MTN's shares fell by as much as 3%, trading 2.7% lower at 11:39 a.m. Johannesburg time. Nigeria, home to MTN's Lagos-listed unit MTN Nigeria Communications Ltd., input more than a third of the group’s total revenue, being the company's largest market by subscribers.

Complicating MTN's financial picture is the company's decision to contest a directive from the Nigerian Tax Tribunal, demanding payment of $47.8 million in outstanding taxes. This assessment comprises value-added tax charges for the periods spanning 2007 and 2010-17.

MTN, buoyed by advice from tax and legal consultants, expressed its intention to appeal this decision. Other African telecoms firms have frequently contested tax demands from different countries and regulators on the continent where they operate. A week ago, several telecoms CEOs, including MTN's Ralph Mupita, called for the "rationalization" of taxes on the mobile industry via specially tailored fiscal policy reforms.

Historically, MTN has experienced several standoffs with Nigerian authorities, with a notable victory in 2020 when the government dropped a $2 billion claim for back taxes. More recently, MTN successfully contested a $773 million back-tax bill in Ghana.