MTN denies claims it broke Nigeria’s currency transfer rules

MTN DID not break Nigeria’s currency transfer rules, the South African telecoms firm said on Friday, denying allegations that it illegally repatriated $14 billion (R195bn) in a dispute analysts said exposed the inherent risk of investing in frontier markets.

Nigeria’s upper house of parliament last month agreed to investigate whether Africa’s biggest telecoms company unlawfully repatriated $13.92bn between 2006 and this year.

Last Thursday, a committee of Nigerian legislators summoned MTN, Nigerian Trade Minister Okechukwu Elenemah and four banks for an “investigate hearing” into the claims.

The crux of the allegation is that MTN did not obtain certificates declaring it invested foreign currency in Nigeria within the 24-hour deadline stipulated in a 1995 law, and so the repatriation of returns on those investments was illegal.

Nigeria is MTN’s most lucrative market out of the 22 countries the company operates in across Africa, Asia and the Middle East, but it is becoming increasingly problematic.

MTN runs Nigeria’s largest cellphone network, which generates a third of the company’s revenue.

Fund transfers

The fund transfer issue has battered MTN’s shares, which were near a six-and-a-half-year low at R105.91 on Friday.

Ferdi Moolman, the chief executive of MTN Nigeria, said in a statement on Friday that when banks issued “certificates of capital importation (CCI)” for funds they brought into Nigeria after the deadline they had done so with the central bank’s approval.

“Often for various reasons, such as not having all the required documentation, for instance, it is not possible to issue a CCI within 24 hours, and the Central Bank of Nigeria’s (CBN) Forex Manual contemplates such situations by asking that the banks refer to the CBN for approval,” Moolman said. “As such, the CBN has the authority, and indeed we believe, approved the banks’ applications to issue CCIs outside the recommended time frame,” he said.

The motion, initially put forward by Nigerian Senator Dino Melaye, claims that MTN requested the certificates at least five years after bringing in the hard currency.

The row comes as Africa’s biggest economy struggles with its first recession in a generation and dollar shortages due to low oil prices, and is the second major dispute between the South African telecoms firm and Nigeria.

Earlier this year, MTN agreed to pay a greatly reduced fine of 330 billion naira (about R14bn) to end a long-running dispute over unregistered SIM cards in Nigeria.

‘MTN’s strategy served them extremely well but it was always a risky strategy.’

Analysts said the latest saga showed the risks inherent in frontier markets, but said international investors found it difficult to ignore Nigeria because of the size of its market.

As part of the settlement to end the SIM card dispute MTN agreed to list its local unit on the Nigerian Stock Exchange.

“Ultimately, MTN Nigeria has to become less foreign and more Nigerian if it is to stay in Nigeria over the long run,” said Guy Zibi, the principal at US-based telecom advisory firm Xalam Analytics.

“MTN’s strategy served them extremely well but it was always a risky strategy, and they are merely seeing the downside of it albeit in a somewhat extreme fashion,” Zibi said.

Rafiu Ibrahim, the chairman of Nigeria’s senate investigative panel on the alleged illegal fund repatriation, said last Wednesday that a team of international and local accountancy experts and lawyers had been assembled to look into the matter. – Reuters