MTN Nigeria to issue N50 billion in new Commercial Paper to support working capital 

MTN Nigeria Communications PLC (MTN Nigeria) has announced plans to raise N50 billion through its latest issuance of commercial paper (CP) under its N250 billion Commercial Paper Issuance Programme.

This Series 11 and 12 CP issuance aims to strengthen MTN Nigeria’s short-term working capital and diversify its financing base, according to a notification to the Nigerian Exchange Limited and the investing public.

This proposed issuance is part of MTN Nigeria’s ongoing strategy to tap the debt market as a flexible funding source to meet immediate financial needs.

It builds upon the company’s series of CP issuances in the past year as it pursues a robust approach to balance its capital structure.

The funds are expected to support the company’s operational and growth requirements as it seeks to expand its infrastructure, improve service delivery, and cater to the increasing demand for telecommunications and digital services across Nigeria.

MTN’s financial statement as of September 2024 suggests it has negative working capital of about N1.49 trillion

Why raise funds via commercial paper 

MTN Nigeria’s N250 billion CP programme allows it to issue multiple CP series as needed, enabling it to meet cash flow demands and service short-term debt without over-relying on long-term financing.

• This approach provides financial flexibility, allowing MTN Nigeria to manage interest costs and adjust its debt profile in line with operational cash flow, which is critical for a company with significant external loans.

• The issuance also serves the broader purpose of diversifying MTN Nigeria’s financing sources, reducing reliance on bank loans, and maintaining a balance between short- and long-term debt.

• This financial strategy not only enhances MTN’s liquidity but also positions it to better withstand the economic challenges in Nigeria’s volatile business environment.

While the company has yet to disclose specific terms of the Series 11 and 12 notes, further details are expected to be shared in the coming weeks.

Leveraging Commercial Paper to Address Short-Term Loan Obligations 

MTN Nigeria currently carries a total external loan portfolio of about N1 trillion, out of which N522.3 billion are short-term loans.

• The increasing frequency of its CP issuances suggests a targeted approach to managing these short-term obligations.

• By raising additional funds through the Series 11 and 12 CPs, MTN Nigeria aims to address its immediate working capital needs while potentially alleviating part of its short-term loan burden.

• In December 2023, MTN Nigeria raised N72.1 billion through CP issuance, followed by an N52.9 billion issuance in November 2023.

• Both were deployed toward similar working capital needs, indicating MTN Nigeria’s strategy of leveraging the debt market to ensure liquidity for its operations and support its substantial loan obligations.