MTN not giving up on Nigeria despite facing a mammoth $8.1bn demand

JOHANNESBURG — With around 54 million subscribers in Nigeria, (South Africa’s total population is only slightly higher at 55.9 million) MTN is not going to walk away from the West African country that easily. This is despite the fact that it’s had to fend previously ridiculous fines and now an allegation that it flouted foreign exchange rules in the country. But while Nigeria is probably MTN’s most important market after South Africa, it’s also it’s most problematic. – Gareth van Zyl

By Loni Prinsloo

(Bloomberg) – MTN Group Ltd. Chief Executive Officer Rob Shuter said the company is committed to Nigeria even as the continent’s largest wireless carrier considers how to respond to an order to return $8.1 billion in repatriated funds.

The relationship between Johannesburg-based MTN and its biggest market is under renewed strain after last week’s bombshell demand, which has sent the share price down almost 20 percent. The news came just three years after Nigeria hit the operator with a $5.2 billion fine – later reduced to about $1 billion – in an entirely separate dispute over SIM-card registration. That incident also weighed heavily on the share price.

MTN Group, Nigeria,
A pedestrian passes by an MTN Group Ltd. bus stop advertisement and roadside kiosk in Lagos, Nigeria. Photographer: Tom Saater/Bloomberg

“We have a proud history of being a major partner to the people of Nigeria and notwithstanding our current difficulties are firmly resolved to continue to do so,” Shuter said in an emailed response to questions Monday.

The CEO, a former Vodafone Group Plc executive, was appointed partly in response to the previous Nigerian crisis, which claimed the job of his predecessor. Since taking over in March 2017, he’s started a review of the South African company’s 22 markets across Africa and the Middle East, and agreed the sale of its Cyprus unit, which it concluded for R4.5 billion ($301 million) in cash, it said Tuesday. However, with more than a quarter of MTN’s total subscribers, Nigeria can’t be easily abandoned.

The Nigerian demand threatens MTN’s plans for an initial public offering in the country and may restrict its ability to pay dividends, depending on how long the dispute drags on.

Flagrant violations

The Nigerian central bank elaborated Sunday that MTN and lenders “flagrantly violated foreign-exchange violations” in taking cash out of the country over eight years through 2015. While four banks were fined a combined $16 million, MTN has been left with the biggest headache, even though it would receive a naira-denominated refund in exchange for returning the $8.1 billion, according to the bank’s Deputy Governor Joseph Nnanna. Outstanding questions include how the company is to pay the cash and what happens if it doesn’t comply.

MTN shares fell 2.5 percent to R86.80 by the close in Johannesburg on Monday, valuing the carrier at R164 billion.

The crackdown on the company comes as Nigeria President Muhammadu Buhari seeks re-election for a new four-year term in a February vote. His administration has gone after companies for irregularities as well as tax-defaulters, part of a wider pledge to fight corruption in Africa’s most populous nation.

MTN and four lenders won approval from Nigeria’s central bank to repatriate funds in a ruling last year, though the agreement did not refer to transactions between the years now under scrutiny. In a letter addressed to MTN Nigeria’s CEO dated Feb. 22, 2017, the central bank confirmed the validity of the company’s certificates of capital importation, which are needed to take funds out of the country.

MTN says Nigeria is seeking to recover $2 billion in back taxes

By John Bowker

(Bloomberg) – MTN Group Ltd. said Nigeria is seeking about $2 billion in back taxes from the embattled wireless carrier after refusing to accept the results of a self-assessment by the company.

The office of Nigeria’s attorney general calculated that the South African company owes $2 billion related to the import of foreign equipment and payments to suppliers over the past 10 years, MTN said in a statement on Tuesday. The company believes it has settled all tax obligations, it said.

The news comes less than a week after MTN was told by the Nigerian central bank to return $8.1 billion it is alleged to have illegally taken out of the country. While the company also refutes that accusation, the shares have slumped by almost 20 percent.