Diesel at N2,000/L threatens N140bn margin hit as MTN Nigeria races to gas

Diesel prices hovering around N2,000 per litre are threatening to wipe out an estimated N140 billion from MTN Nigeria’s margins, forcing the telecom giant into an urgent race to gas as it battles the rising cost of powering its network in Nigeria’s unreliable electricity environment

With diesel prices hovering around N2,000 per litre, the company says it could see a margin decline of about 2.0 percent if energy costs keep rising faster than revenue growth.

At current revenue levels, that 2.0 percent margin squeeze translates to an estimated N140 billion hit to earnings, highlighting how even a small shift in cost structure can significantly impact profitability at scale.

The warning underscores a growing paradox in Nigeria’s telecom sector: even as data consumption surges and revenues expand, the cost of delivering each gigabyte is rising sharply, driven largely by the country’s unreliable power supply and heavy dependence on diesel.

In its latest sustainability disclosures, MTN Nigeria revealed that it consumed over one million gigajoules of energy in 2025, equivalent to about 277 million kilowatt-hours, reflecting the scale of its operations across base stations, switching centres, offices, and an expanding digital infrastructure footprint.

Diesel remains the dominant energy source, accounting for 58.11 percent of total consumption, far exceeding gas-powered sources (23.63 percent) and electricity from the national grid (18.04 percent). Renewable energy, including solar, contributed just 0.05 percent.

Using these figures, industry estimates suggest the company may be consuming over 40 million litres of diesel annually. At current market prices of around N2,000 per litre, this implies an estimated annual diesel spend in the region of N80 billion to N90 billion, though actual costs may vary depending on generator efficiency, logistics, and regional price differences.

This heavy reliance on diesel not only drives operating expenses but also exposes the business to fuel price volatility, making cost planning increasingly difficult.

The company’s total operating expenses stood at N1.39 trillion, meaning the N8.1 billion saved through increased use of gas-powered electricity remains relatively modest compared to the overall energy burden.

Data growth meets energy reality

Despite strong demand for data services, reflected in a 56.2 percent growth in data revenue, the economics of telecom operations are becoming more challenging.

Each additional gigabyte consumed requires energy-intensive infrastructure, including base stations and data centres, all of which must run continuously. As energy costs rise, the cost to deliver data increases, squeezing margins even as usage climbs.

A breakdown of electricity consumption shows where the pressure lies. Data centres accounted for the largest share at 38.2 percent, followed by base transceiver stations at 31.6 percent and switching infrastructure at 21.2 percent. Office buildings made up 8.7 percent.

Data centre expansion raises the stakes

The pressure is intensifying as MTN Nigeria deepens its role in Nigeria’s digital ecosystem, including the rollout of its Tier III data centre and cloud infrastructure.

Data centres are among the most energy-intensive assets in the telecom value chain, requiring uninterrupted, high-quality power to ensure uptime and protect sensitive digital workloads.

However, with Nigeria’s epileptic power supply, there is a growing need for stable, scalable, and cost-efficient energy solutions to support these facilities, as outages or fluctuations can disrupt services for businesses, financial platforms, and millions of users who depend on digital connectivity.

This makes energy not just a cost issue, but a strategic one, central to service reliability, customer experience, and future growth.

Gas strategy faces structural limits

To reduce its exposure to diesel, MTN Nigeria is accelerating a shift toward a more diversified energy mix, particularly gas and solar-hybrid solutions.

Capital expenditure nearly doubled in the first quarter of 2026, rising 92.8 percent year-on-year to N390.3 billion, driven in part by investments in alternative power infrastructure.

Nigeria’s vast natural gas reserves, estimated at over 215 trillion cubic feet, offer a potential pathway to cheaper and cleaner energy. Indeed, the company reported savings of N8.1 billion in 2025 from increased use of gas-powered electricity.

However, supply constraints remain a major bottleneck. Gas shortages have already affected power generation nationwide, with several plants reportedly operating below capacity or idle in early 2026.

This raises concerns that gas may not scale quickly enough to displace diesel, leaving operators locked into a costly energy mix in the near term.

Emissions rise as diesel persists

Karl Toriola, the chief executive officer, MTN Nigeria, noted that the company’s Scope 1 and Scope 2 emissions rose by 4.8 percent to about 106,588 tonnes of carbon dioxide equivalent in 2025.

The increase was largely driven by network expansion and greater reliance on diesel due to grid instability, highlighting the environmental cost of Nigeria’s power challenges.

Beyond fuel switching, the company is also pursuing energy efficiency measures. High-efficiency cooling systems and inverter solutions delivered additional savings of about N352.6 million, while solar-powered rural sites expanded by 18 percent, reducing diesel use in off-grid locations.

However, these gains remain incremental compared to the scale of the challenge.

A sector-wide structural problem

The issue extends beyond a single operator. Nigeria’s telecom industry is increasingly caught between rising data demand and a structurally weak power ecosystem, forcing companies to spend heavily just to maintain network uptime.

For MTN Nigeria, the stakes are particularly high. As it expands into data centres, cloud services, and fintech, energy reliability and cost will play a defining role in shaping its margins and long-term sustainability.

Unless grid reliability improves or gas supply constraints are resolved, diesel is likely to remain a dominant, yet costly, backbone of telecom operations, threatening profitability even in the face of strong revenue growth.