Impact of the Recent Actions of Government Against MTN Nigeria on Investor Confidence
This article by Michael Dedon, aims to critically examine the implications of the actions of the Nigerian Government under customary international law, as it pertains to protection and security for foreign investments, under which category MTN Nigeria fal
“THE STATE’S RESPONSIBILITY, EXTENDS TO ACTIONS PERPETRATED BY ITS ORGANS. THE APPLICABILITY OF A TREATY PROVISION ON PROTECTION AND SECURITY TO DIRECT ATTACKS ON THE INVESTOR’S PERSON AND PROPERTY BY ORGANS OF THE HOST STATE, IS BEYOND DOUBT....IT IS HOPED THAT, THE NIGERIAN GOVERNMENT WILL NOT LEARN TO ITS COST, THAT IF YOU ARE NOT NICE TO FDI, IT UPS STICKS AND FINDS A NEW PLACE TO LIVE”
Allegations and Fines
The Central Bank of Nigeria (‘CBN’) recently indicted MTN Nigeria, alleging that it collaborated with Standard Chartered Bank Nigeria, Citibank, Stanbic IBTC Bank and Diamond Bank Plc, to illegally repatriate $8.134 billion between 2007 and 2015 from Nigeria to its parent company in Johannesburg, South Africa.
As a consequence of the said indictment, the CBN slammed a fine of N5.87 billion on the four banks, over flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006. In line with the fine on the banks, the CBN also directed MTN Nigeria to immediately refund $8,134,312,397.63 it alleged was illegally repatriated by the telecoms company, to the coffers of the CBN.
MTN’s Response
MTN Nigeria denied the allegation, insisting that the apex bank vetted and approved the transactions in question. In a statement (widely circulated by the news media) by MTN Nigeria, it was stated that “No dividends have been declared or paid by MTN Nigeria, other than pursuant to CCIs issued by our bankers and within the approval of the CBN as required by law”.
Stanbic IBTC’s Response
In its official response to the CBN, Stanbic IBTC Bank described the conclusions reached by the regulator, as based on “factually incorrect premises”. It reminded the CBN of the outcome of its findings on the same issue, following a special examination that was conducted in March this year. The finding reportedly cleared the bank of any wrongdoing, claiming that its actions were in line with extant rules and regulations. The other banks have also issued statements in similar vein, to that of Stanbic IBTC Bank.
Attorney-General of the Federation
Almost concurrently with the said CBN’s action, the office of the Attorney-General of the Federation (‘AGF’) also wrote to MTN Nigeria, demanding the company should pay circulated by the news media $2bn as tax arrears on imported equipment, and unpaid VAT on payments made to suppliers. This was conveyed in a letter signed by Mr Abubakar Malami, SAN (the AGF), which was circulated by the news media. In the said letter, the AGF notified MTN that his office made a high-level calculation, that revealed that MTN Nigeria should have paid approximately $2bn in taxes for importation of foreign equipment and unpaid VAT on payments made to foreign suppliers, over the last 10 years.
However, MTN Nigeria, in reaction, said that an initial assessment of the period indicated that total payments made to the tax authorities with regard to the foreign imports and payments amounted to $700m, adding that, it had fully settled all taxes on the imports under scrutiny.
Possible Ruin of MTN
As a direct consequence of the actions by the CBN and the AGF, the shares of the MTN Group plunged by 25 per cent to a nine-year low of R86.50 (South African Rand). Also, the much anticipated MTN Nigeria initial public offerings (‘IPO’), which was an initiative to absorb the hit of the Nigeria Communications Commission (‘NCC’) fine earlier paid by the telecoms giant, has been put on hold.
There is no doubt that, the said actions against MTN Nigeria have had a negative consequence on its brand, and also threatens its corporate existence in Nigeria, as the company may go under, if the Nigerian Government insists that all the imposed fines and demands on the company are complied with, without an opportunity for a review or negotiations.
It is noteworthy that, the value of the current claims by the Nigerian government at R150 billion, outstrip the total value of all the shares in MTN listed on the Johannesburg Stock Exchange in South Africa. As it is, MTN Nigeria may be wondering that even if it succeeds in convincing the Nigerian authorities, that they had the permission it claims it was given to move $8.1 billion in dividends out of the country and even if it manages to prove that its tax affairs are in order despite a $2 billion demand from the Nigerian Government, its investors will constantly be wondering where the next brickbats will be coming from. This is bad for investors’ confidence. The actions of the Nigerian Government, may look like a shake down to the South African investors of MTN Nigeria.
This article is not to apportion blame or say who is right and wrong, as between the Nigeria Government and MTN Nigeria. Rather, it is to highlight the impact of the actions taken by the Nigerian Government on investor(s) confidence, bilateral relations with South Africa, and the obligations of the Nigerian Government to foreign investors operating in the Nigerian economy.
Duty of State to Protect Foreign Investors
International investment law, is designed to promote and protect the activities of private foreign investors, like MTN Nigeria and three of the four sanctioned banks. Globally, foreign investment is regulated by a Bilateral Investment Treaty (‘BIT’) between two countries desirous of trade, or a regional treaty, such as the Economic Communities of West African States (‘ECOWAS’) or the North American Free Trade Agreement (‘NAFTA’).
The basic international law governing treaties and their interpretation and application, is the Vienna Convention on the Law of Treaties. Like contracts, treaties bind the State parties who have consented to them. Under international law, State actors assume certain responsibilities, to respect treaties and protect foreign investments. Under the International Law Commission on State Responsibility, it is provided as follows: “Article 4: Conduct of organs of a State