Lagos - MTN, Africa’s largest phone operator, said Nigeria’s currency will probably be devalued after next year’s election and the move will boost the company’s import costs in its biggest market.
Declining oil exports and prices means that the central bank of Africa’s biggest crude producer will face difficulties in keeping the naira stable against the dollar before the February 14 vote, Andrew Bing, chief financial officer of MTN’s Nigerian unit, said in a May 5 interview in Lagos, the commercial capital.
The official peg may have to be lowered by three or four percent, he said.
Nigeria’s foreign-exchange reserves declined 13 percent this year to $38.1 billion by May 2 as the central bank sold dollars to prop up the naira and as oil production missed estimates.
Godwin Emefiele, who becomes the institution’s governor in June, told the Senate in March that a devaluation of the naira is “not an option” and would be “devastating” for the economy.
“No matter what Godwin wants it has to happen, otherwise this economy in a year will be down the tube,” said Bing, 49, who is leaving his position for a sabbatical at the end of this month.
“I don’t think it will happen this year,” he said.
A devaluation would be “politically unpalatable” and it may rather happen “after the election,” Bing said.
The central bank spent the most reserves this year in the foreign-exchange market since 2010 to shore up the naira after it tumbled to a record low in late February against the dollar.
The suspension that month of bank Governor Lamido Sanusi jolted investors, sparking the selloff.
The bank targets a range for the naira 3 percentage points above or below 155 per dollar at its twice-weekly currency auctions.
The currency gained 0.1 percent to 161.85 per dollar by 3:06 p.m. in Lagos.
Theft and pipeline vandalism in the Niger River delta cut oil output to less than 2 million barrels a day in 2013 from the government’s estimate of 2.5 million barrels.
Production has averaged 2 million barrels this year, according to data compiled by Bloomberg, less than a 2014 estimate of 2.39 million barrels.
Prices for Brent crude dropped three percent this year, while West Texas Intermediate rose 1.9 percent, compared with a 4.7 percent climb in the same period of 2013.
Changing the naira’s peg would make imports more expensive for MTN, Bing said.
The company has 57.2 million subscribers in Nigeria, which is Africa’s most populous country and has its biggest economy.
“We still import a lot of our services, diesel is imported,” he said.
“Our generators are imported, our handsets are imported, they are just so much.”
The Johannesburg-based company last year spent about 34 billion naira on diesel to power its base stations across the country due to a lack of regular electricity in Nigeria.
The West African nation will hold elections on February 14 next year, when the ruling People’s Democratic Party may face its toughest electoral challenge since it came to power in 1999 after a series of defections to the opposition All Progressives Congress, which is promising to create jobs and fight corruption.
President Goodluck Jonathan hasn’t declared if he will run for another term and the APC hasn’t selected a presidential candidate.
While the election campaign may lead to uncertainty over Nigerian politics, it may also boost revenue, Bing said.
“Elections are good for our business because people talk.” - Bloomberg News