MTN Nigeria says rising fuel costs could wipe $102 million off profits

MTN Nigeria has warned that rising fuel prices could affect its profitability this year, even as the country’s largest telco operator delivers record revenue growth and rebounds from last year’s currency shocks.

In its Q1 2026 results released on Wednesday, the company said it expects a 1.8 to 2.0% decline in full-year Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margins if diesel prices average ₦2,000 ($1.45) per litre in the second half of the year. 

Based on current revenue levels at ₦1.5 trillion ($1.09 billion), an expected decline of 2.0% would translate into an estimated ₦120 billion ($87.24 million) to ₦140 billion ($101.78 million) hit to profits.

After eliminating most of its exposure to foreign exchange volatility, following the repayment of $105 million in dollar-denominated loans in Q1, MTN Nigeria now faces a more structural constraint: the rising cost of power.

The outlook reflects mounting volatility in Nigeria’s fuel market, shaped by both global and domestic pressures. In March, an escalation in the US–Israel–Iran conflict triggered the temporary closure of the Strait of Hormuz, pushing crude prices above $100 per barrel. 

The shock quickly fed into Nigeria’s deregulated market, raising import costs and tightening supply. Dangote Refinery increased its petrol gantry price to ₦874 ($0.64) per litre from ₦774 ($0.56). In contrast, retail prices at independent fuel stations climbed to ₦1,200 ($0.87) per litre in some states 

“We continue to monitor developments in the operating environment, including energy price volatility and regulatory dynamics,” MTN Nigeria CEO Karl Toriola said in the Q1 report. “Based on an assumed average Lagos ex-depot diesel price of ₦2,000 ($1.45) in H2, we estimate a 1.8–2.0pp impact on full-year EBITDA margin.”

The projected margin squeeze comes despite strong underlying performance. MTN reported a 165.9% increase in profit after tax to ₦355.5 billion ($258.44 million), while service revenue rose 41.8% to ₦1.5 trillion ($1.09 billion). 

EBITDA margin expanded to 55.3%, up 8.7% year-on-year, supported by cost discipline and pricing adjustments.

 The company’s profitability is increasingly tied to energy costs, reflecting the realities of operating telecom infrastructure in Nigeria. With an unreliable national grid, MTN relies heavily on diesel generators to power more than 20,000 base stations nationwide.

As diesel prices rise, the cost of running the network increases sharply. This creates a mismatch between revenue growth and cost escalation, where higher data consumption does not necessarily translate into higher margins.

Data usage continues to surge, with average consumption per subscriber rising to 14.3GB, driving a 56.2% increase in data revenue. But each additional gigabyte carries a higher energy cost, compressing profitability.

The pressure is already visible in MTN’s operating expenses. Direct network operating costs rose 13% year-on-year to approximately ₦1.39 trillion ($1.01 billion), reflecting higher spending on diesel, electricity, and power system maintenance. 

The company also faces indirect energy costs through tower lease agreements. MTN leases most of its infrastructure from companies such as IHS Towers and American Tower, where contracts include “power indexation” clauses that pass rising fuel costs directly to tenants. When MTN Nigeria renegotiated its lease contract with IHS Towers and ATC on August 8, 2024, reducing the energy cost component was cited as one of the main reasons to support the recovery of its capital positions.

At the same time, the cost pressure is reshaping MTN’s investment strategy. Capital expenditure nearly doubled to ₦390.3 billion ($283.74 million) in the quarter, with a growing share directed at improving energy efficiency. The company is accelerating the deployment of solar-hybrid systems and exploring gas-powered alternatives to reduce reliance on diesel.