MTN Nigeria Communications Plc has seen its market capitalisation soar to approximately N10.8 trillion, positioning the telecom giant among the top three most valuable stocks on the Nigerian Exchange Limited (NGX).
As of October 24, 2025, shares were trading at N515, marking a 52-week high and an impressive 157.5% increase year-to-date from N200 at the end of 2024. This surge follows a remarkable turnaround in the company’s first-half results for 2025, where MTN reported a net profit of N414.9 billion, rebounding from a staggering N519.1 billion loss a year prior.
However, despite these headline figures and the impressive climb in market value, analysts caution that underlying structural, valuation, and corporate governance issues may render this elevated market cap more a source of risk than reassurance for investors.
Reliance on FX Movements
The dramatic recovery reported in H1 2025 largely stemmed from a significant reduction in foreign exchange losses, plummeting from N887.7 billion in the same period last year to just N5.2 billion this year. While operating profit did rise to N892.8 billion, much of the improvement in pre-tax profitability—up to N622.3 billion from a loss of N751.3 billion—can be attributed to one-off gains linked to currency fluctuations rather than sustainable operational enhancements. Should the naira weaken again or if monetary policy shifts, these temporary benefits could reverse, jeopardising the current high market cap.
Valuation Concerns
Trading at N10.8 trillion, MTN’s shares carry lofty expectations. The stock’s impressive gains assume ongoing margin expansion and stable macroeconomic conditions. Yet, the fundamentals tell a mixed story: revenue increased to N2.38 trillion in H1 2025, with data revenue doubling to N1.23 trillion. Nevertheless, MTN’s net assets remain negative, raising concerns about the sustainability of its valuation. When a company’s market cap surpasses its tangible equity, driven by transient accounting advantages, investors face significant risks if profitability normalises or sentiment shifts.
Volatility and Downside Risks
MTN’s share price has experienced wild fluctuations, rising from a low of N169 to N515 within the year. This volatility suggests a market influenced by sentiment rather than consistent fundamental improvement. While momentum-driven buyers can rapidly inflate prices, the reverse is equally possible; negative macroeconomic developments or disappointing quarterly results could lead to steep losses for those who entered the rally late.
Fragile Financial Position
Despite improvements in H1 2025, MTN’s balance sheet remains precarious, with negative equity limiting financial flexibility and complicating access to affordable debt. Should the company require fresh capital or face increased funding costs, the market may reassess the premium currently embedded in its valuation.
Concentration and Country Risks
MTN Nigeria’s fortunes are closely tied to the Nigerian economy and its regulatory landscape. Although recent FX reforms have benefited the company, any potential policy reversals or regulatory clampdowns could disproportionately impact MTN’s valuation. As such, investors are exposing themselves to significant risk tied to a single company and a volatile macroeconomic environment.
Profit-Taking and Limited Catalysts
Much of MTN’s recent rally appears to be priced in, with few clear catalysts to drive further gains. This scenario leaves the stock vulnerable to profit-taking by institutional investors and potential retracements driven by market sentiment. For those who entered the market late, the risks of a downturn from current prices are considerable.
Implications for Investors
Risk Management: Investors should approach MTN’s high market capitalisation with caution, diversifying their exposure and adjusting their positions to mitigate risk.
Valuation Discipline: It is crucial to avoid overpaying for shares without thoroughly assessing potential earnings scenarios, particularly if FX benefits reverse.
Monitoring Signals: Investors should keep a close eye on FX policies, inflation, interest rates, and regulatory changes that could affect the telecom sector.
Time Horizon Considerations: Long-term investors who appreciate MTN’s market position may choose to stay invested, but shorter-term traders should brace for increased volatility.
Conclusion
While MTN Nigeria’s ascent to a N10.8 trillion market cap is a significant milestone, much of this growth is linked to favourable FX movements and one-off accounting adjustments rather than a robust operational recovery. For many investors, the high market valuation may heighten downside risks and necessitate rigorous valuation assessments and active risk management before committing additional capital.
