Nigerian ‘shakedown’ jolts MTN and banks

● MTN, Africa’s largest mobile operator, has found itself in the cross hairs in Nigeria’s volatile political and economic environment once again with the demand by the country’s central bank to return as much as $8.1bn (R119bn) in dividends.

Looming elections and a shortage of foreign exchange in the continent’s largest economy have been singled out as reasons for the country’s scramble to seek the return of the funds as it grapples with a currency that has slumped more than 45% over the past three years against the US dollar.

Almost two years ago, MTN faced the prospect of one of the world’s largest corporate fines in Nigeria, threatening the very future of the company, for failing to disconnect unregistered subscribers. Since that threat, which was eventually reduced significantly on the grounds that the company would have to list its operation, MTN’s shares have plunged 47%.

In comparison, Vodacom, which does not have a Nigerian presence, has seen its shares decline only 16%.

Industry analysts have called the central bank’s move a “shakedown” of the banks. This was detrimental to any emerging-market economy, especially Nigeria, which has an unstable banking sector in desperate need of international engagement.

Nigeria’s central bank not only called for dividends that moved out of the country between 2007 and 2015 to be returned, but also fined Standard Bank, Stanbic, Citigroup, Standard Chartered and Diamond Bank $16m for their role in its facilitating these movements.

Stanbic IBTC Bank said in a statement it is not a beneficiary of any of the remittances made on behalf of clients, and denies any imputation of malfeasance and insists it has acted legally.

The “odd thing in all of this is that the [central bank] wrote to the banks and to MTN, but they don’t say the money must be refunded to the company that paid it, they say it must be refunded to the central bank”, a source close to the company said.

The allegations against MTN and the banks come as Nigerian president Muhammadu Buhari seeks re-election in February. In the run-up to those polls his government, which came in on a ticket of fighting corruption, has been going after tax defaulters. The Nigerian economy has also struggled to break free from its dependence on oil, which still dominates the economy.

The latest developments have some observers questioning the listing of MTN’s Nigerian operation on the Nigerian Stock Exchange by the end of this year. Alastair Jones, an analyst at London-based New Street Research, told Business Times “it is hard to see the listing going ahead with this overhang”.

“This could be a further step back in MTN’s domestic relationships, which could impact its business in future years.”

It is believed that MTN’s plans to list its Nigerian operation are at an advanced stage,

Shortage of foreign exchange one reason for scramble for dividend grab

with the Nigerian initial public offering prospectus already having been reviewed by the company’s board three times.

MTN started its operations more than 17 years ago, and over the last 10 years the historical dividends repatriated by MTN Nigeria have amounted to about $10bn.

Nigeria remains MTN’s largest market in terms of subscriptions, with the mobile operator currently having 24.1% of the subscribers in Nigeria compared to 13.6% of those in SA.

SA remains the largest contributor of revenue at 32.2% to the group, and Africa’s largest economy trails at 27.2%, according to MTN’s annual report.

Martyn Davies, MD of emerging markets & Africa at Deloitte said in the last three to four years the current administration was initially regarded as a lot more businessfriendly “but it’s turned out to be rather hostile towards business”.

“It’s not just the fine, but the exorbitant nature of these fines . . . $8.1bn is bigger than a large number of African country GDPs.”

The MTN source said it would not consider exiting the Nigerian market.

“They are in their own pre-election phase and I think that they were caught in the crossfire,” an industry analyst said.

MTN’s shares closed 2.9% firmer on Friday, but for the week plunged 17%, valuing the company at R167bn.

It’s not just the fine but its exorbitant nature . . . $8.1bn is bigger than many African GDPs

Martyn Davies

Managing director of emerging markets&Africa at Deloitte