Late Wednesday, the country’s central bank ordered Africa’s largest wireless carrier to return $8.1 billion it says was repatriated improperly over eight years through 2015. The decision caught the company and its shareholders off guard and the shares plunged the most in 20 years to their lowest level since 2009.
Nigeria is Africa’s most populous country and MTN’s biggest market, but has delivered headache after headache for the South African company in recent years. The shares have taken a beating over repeated conflicts with the government and regulators, and this week’s surprise order comes as MTN prepares to list shares in Lagos as part of a separate, unrelated dispute resolved in 2016. That settlement also led to a $1 billion fine for MTN.
The latest setback “is very strange,” Chief Executive Officer Rob Shuter said on a call with investors before the market opened on Thursday, explaining that the central bank is fixated on dividends the company withdrew from its Nigerian unit after years of capital investments. Why should the dividends be paid to the central bank and not the “company that paid them in the first place?” he asked, adding that MTN is refuting all claims and that due process was followed.
The stock slumped 22 percent to R83.89 as of 11:24 a.m. in Johannesburg, valuing the company at R159 billion ($10.8 billion). The shares are down 38 percent this year, compared with a 0.2 percent rise on the FTSE/JSE Africa All Share Index.
An immediate concern for investors is that MTN won’t be able to repatriate funds out of Nigeria while the dispute is unresolved, meaning the company may have to cut the dividend completely, Alastair Jones, a London-based analyst at New Street Research, said in a note. “Clearly, there is going to be a, perhaps lengthy, process whereby this issue is resolved.”
The uncertainty is also likely to derail the planned Nigeria initial public offering, as foreign investors will be put off taking part, according to Bloomberg Intelligence analyst John Davies.
The order comes about two years after Johannesburg-based MTN was first accused of repatriating dividends in contravention of foreign-exchange laws. The company was cleared in a report issued in November 2017 following a probe commissioned by Nigerian lawmakers. MTN said in 2016 that its bankers had obtained central bank approvals before any dividends were issued.
“The re-emergence of these issues is regrettable as it damages investor confidence and, by extension, inhibits the growth and development of the Nigerian economy,” MTN said in a statement on Thursday. “We will engage with the relevant authorities and vigorously defend our position on this matter and provide further information when available.”
The central bank fined Citigroup Inc., Standard Chartered Plc, Standard Bank Group Ltd.’s Stanbic IBTC and Diamond Bank Plc about 5.9 billion naira ($16 million) for helping to move the money. The banks and MTN were ordered to refund the cash.
Standard Bank dropped 3.1 percent in Johannesburg, leading declines on the six-member FTSE/JSE Africa Banks Index.
MTN’s separate, $1 billion fine in Nigeria was for missing a deadline to disconnect unregistered customers as part of a government security crackdown to counter an Islamist insurgency. Negotiations over that penalty went on for almost a year and weighed heavily on the share price, which has never recovered. The company fired its then-CEO over that crisis, and drafted in former US Attorney General Eric Holder to help settle the matter.
Standard Chartered received the largest penalty Wednesday for transferring the biggest amount of $3.4 billion, with Citigroup responsible for $1.7 billion. Stanbic IBTC is engaging with the central bank over the issue, it said in a statement on Thursday. The other lenders didn’t immediately comment.
Nigeria is MTN’s biggest market with more than 54 million customers, out of 221 million worldwide.