MTN Rises as Nigerian Currency Devaluation Lowers Record Fine

  • Devaluation of naira lessens sting of $1.7 billion fine
  • Weaker naira improves company’s prospects in Nigeria

MTN Group Ltd.’s record $1.7 billion Nigerian fine is about to get a whole lot cheaper.

MTN rose the most in a week as investors prepared for a slump in the Nigerian naira after Africa’s second-biggest crude producer’s central bank said it will let the currency float and weaken next week. A devaluation will result in a significant discount to the 330 billion naira fine that MTN agreed for missing a deadline to disconnect unregistered users in Nigeria, its biggest market.

MTN rose as much as 5.3 percent in Johannesburg and advanced 4.3 percent to to 143.61 rand at 12:53 p.m., valuing the company at 265 billion rand ($17.4 billion).

"Removing the currency peg will not only reduce the fine, but will improve MTN’s ability to do business in Nigeria in general," said Mergence Investment Managers analyst Peter Takaendesa. "The company needed the liquidity to further expand its network in the country and move some money around to pay dividends."

The timing of Nigeria devaluation is a boon for MTN, which reports its financial results in South African rand. The company reached the deal to pay the fine, one-third of an original penalty, after eight months of start-and-stop negotiations with local officials. MTN’s battle with Nigerian authorities had weakened the stock price by a third. The government originally issued the equivalent of a $5.2 billion penalty and later lowered it to $3.9 billion.

Free trade in the naira, set for Monday, will mark the end of more than a year of resistance by President Muhammadu Buhari. Nigeria has held the naira at 197-199 per dollar since March last year even as other oil exporters from Russia to Kazakhstan and Angola devalued their currencies as crude prices slumped.

MTN said this week that it planned to significantly increase its capital spending in Nigeria to start a fiber-network rollout in six cities in the and extend 3G coverage to 90 percent of the country in 2017.

Before it's here, it's on the Bloomberg Terminal.