Fuel Subsidy Removal Takes a Toll on MTN Stock Prices

Channels Television  
Updated January 5, 2012

The removal of fuel subsidy in Nigeria is not only affecting fuel prices and transportation fares, but has also taken a toll on the MTN Group Ltd.

Sim Card

According to Bloomberg, stock for MTN, the continent’s biggest mobile-phone service provider, “fell the most in two days” since August 4.

WhenNigeria’s government removed fuel subsidies, they effectively cut consumer spending power in what is MTN’s largest market.

MTN fell (MTN) as much as 6.97 rand, or 5 percent, to 132.64 rand in Johannesburg today, taking its two-day decline to 7.8 percent. The stock traded at 133.70 rand as of 3:13 p.m, according to Bloomberg.

Khulekani Dlamini, head of research at Cape Town-based Afena Capital, said as fuel prices continue to rise in the country, “People will have to choose between buying phone airtime and paying for transportation”.

Dlamini said the end of fuel subsidy in Nigeria combined with proposed sanctions against Iran’s nuclear program are “the major issue” for MTN’s stock price.

Despite protests in the oil rich nation against the move, Information Minister Labaran Maku confirmed yesterday that the decision will not be reversed.

Both the information minister as well as Labour Minister Emeka Wogu join the Jonathan administration in promising that the removed subsidy, which totalled a whopping N1.3 trillion in 2011, will now go toward providing the nation’s with much needed infrastructure.

However, research Dlamini said ending subsidy in Nigeria will create a chain reaction. Gasoline prices will double, hiking the price of food in the market, he said, adding that “transportation affects everything”.