MTN’s $10bn Nigeria feud: SARB says SA faces systemic risk

JOHANNESBURG — MTN’s problems in Nigeria have, to date, largely been contained to the mobile operator’s business itself. But considering all the players involved in this latest $10bn dispute, the Reserve Bank thinks that the mobile network’s latest problems in Nigeria could potentially spark systemic risk to the South African financial system. This is incredible to consider and should be a prod for the team at MTN to sort out this situation as soon as possible. – Gareth van Zyl

By Prinesha Naidoo and Roxanne Henderson

(Bloomberg) — MTN Group Ltd.’s battles with Nigerian authorities over $10 billion in repatriated funds and back taxes could increase risk in South Africa’s financial system, the Reserve Bank said.

Africa’s largest wireless carrier by subscribers is facing mounting pressure to return $8.1 billion to Nigeria after its central bank argued that the Johannesburg-based company had repatriated funds illegally. Separately, the West African nation’s attorney general’s office alleges the company owes $2 billion in back taxes.

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MTN CEO Rob Shuter and CFO Ralph Mupita speak during a news conference to announce the company’s full year results at their headquarters in Johannesburg. Photographer: Waldo Swiegers/Bloomberg

The “near-term repatriation of the funds to the Nigerian authorities could affect MTN’s ability to continue meeting its debt obligations, including those in the South African banking sector,” the South African Reserve Bank said in its Financial Stability Review released Wednesday in the capital, Pretoria. “Given the interconnected nature of the financial system, that could increase systemic risk.”

The claims amount to almost all of MTN’s market value of about $12 billion, SARB said. That could also lead to a “worst-case scenario” of MTN pulling out of Nigeria, which would increase the company’s exposure level to reputational risk, it added.

Nigeria’s central bank alleged in late August that MTN and four banks — Standard Chartered Plc, Citigroup Inc., Stanbic IBTC Plc and Diamond Bank Plc — illegally repatriated the money from Nigeria. MTN sought an injunction in early September to buy itself time to fight the claim in its biggest market, which has wiped 18 percent off its market value within two weeks.

The shares traded 0.6 percent higher at 89.50 rand at the market close on Wednesday, valuing the company at 169 billion rand ($12.1 billion).