Nigerian firms seeking cash find no takers as MTN fiasco deters investors
Although resolved, the MTN certificate of capital importation (CCI) repatriation issue seems to have left a negative after-effect on investors’ attractiveness for Nigerian firms.
Businessday checks revealed that the inability of some Nigerian firms to attract funds from investors in recent times can be linked to the souring of investors’ appetite for Nigeria as a result of the MTN fiasco.
Ibraheem Babalola, managing director of Muster, an Ai-powered peer-to-peer shared housing market place, said there was an investment deal that the company was going to close in October 2018, but the deal was never to be.
“It was an international deal involving a lot of money that would have enabled us to do so many things and make us grow very fast, and the person that was leading the company that was going to invest in ours had done a lot of deals in the past,” Babalola told Businessday.
“But the day before the agreed date that we were supposed to sign the deal, complete the transaction and close it, they reached out to us that one of their limited partners (LP) needed for our next round of investment was uncomfortable with Nigeria FX laws on repatriation and as such they wouldn’t be going forward with the deal,” Babalola said.
That was after the parties had concluded on the investment discussions and the investors had sent the term sheet to Muster.
Babalola said the incident happened at the time when the “whole MTN and CBN issue was happening and we lost that deal just because of that and that is the worst encounter for Muster”.
On whether or not the investment firm didn’t understand Nigeria’s policy well enough as that might have been the reason for not going through with the deal, he said they were not a first-time investor as they “were one of the very early
investors in Hotels.com, they sold a company to Thomas Cook and did IPO for about four companies and has also helped in the sale of about five companies”.
MTN Group recently reached a $53 million settlement with the Central Bank of Nigeria (CBN) to resolve a dispute over an alleged illegal transfer of $8.1 billion out of Nigeria.
“We know it requires material work to change the negative perspective some investors have of Nigeria but we are doing that and it is working, albeit slowly,” Yewande Sadiku, chief executive officer, Nigerian Investment Promotion Commission (NIPC), said at a conference in Singapore.
The story of another lost investment by a Nigerian firm was narrated to Businessday by someone familiar with the start-up.
“I know of a company who, after talks with an investment firm and close to finalising a deal, got a call that they cannot pull through with it,” the source said, pleading anonymity.
He, however, did not state the reason but said “this was just during the period MTN was put under pressure to pay the fine by CBN”.
The fine and resultant squeeze put on MTN by Nigerian authorities was condemned by many foreign investors.
“A short-term gain like the MTN fine leads to longer-term pain as who wants to invest in Nigeria after episodes like these?” Wayne McCurrie, a senior portfolio manager at South Africa-based Momentum Asset Management, said.
Rafiq Raji, chief economist at Macroafricaintel, said seasoned Africa-focused investment professionals are not really moved by such MTN events considering such hold- ups are typical of emerging markets countries.
He added that the key determinant, as with all investment decisions, is whether the reward outweighs the risks.
“The only difference now is that more African countries are competing for these investments and are increasingly better at attracting them,” he said.
Data already show that Nigeria is losing out to its African peers as a destination for Foreign Direct Investment.
FDI inflows to Nigeria fell to $981.7 million in 2017, less than a third of South Africa’s $3.2 billion FDI inflow and seven times less than the $7.4 billion flows mustered by Egypt, the continent’s top FDI destination that year, according to National Bureau of Statistics.
Ghana, the second-largest economy in West Africa that is the size of Lagos in population terms, attracted $3 billion, the chief of the Ghanaian Investment Promotion Commission said at the Africa Singapore Business Forum.
That gives Nigeria an FDI per head of $5.4 million, compared to Egypt’s $77.8 million and South Africa’s $58 million, given the three countries’ 180 million, 95 million and 55 million population, respectively, underscoring the need for increased foreign investment in Nigeria, projected to be the world’s most populous nation after India and China by 2050.
Meanwhile, at the last MPC meeting, Godwin Emefiele, governor of Nigeria’s central bank, stressed that the MTN issue was an isolated one.
“I will continue to say that CCIS that are being issued to our foreign investors remain sacrosanct and no other company is being investigated on the issue of CCI,” Emefiele said.