Nigeria stuns MTN with $8.1 billion demand, shares plunge
* Shares fall as much as 25 percent
* Nigeria says MTN Nigeria illegally paid $8.1 bln to parent
* MTN denies any wrongdoing
(Adds MTN Ghana IPO results, analyst)
By Tiisetso Motsoeneng
JOHANNESBURG, Aug 30 (Reuters) - MTN Group shares
plunged as much as 25 percent to a nine year low on Thursday, a
day after Nigeria ordered the telecoms group's Lagos-based
business to hand over $8.1 billion that the authorities say was
illegally sent abroad.
The demand by Nigeria's central bank is the latest setback
for MTN in Nigeria, the South African group's most lucrative but
increasingly also its most problematic market.
It comes two years after MTN, Africa's biggest telecoms
company, agreed to pay more than $1 billion to end a dispute in
Nigeria over unregistered SIM cards.
The latest case underlines the risks of MTN's strategy to
operate in emerging markets, a move that has made it one of
post-apartheid South Africa's biggest commercial success
stories, with operations in more than 20 countries.
Nigeria's central bank said the funds had been illegally
moved abroad because the company's bankers had failed to verify
MTN had met all the foreign exchange regulations.
MTN denies the allegations.
MTN shares closed down 19.41 percent at 86.50 rand, after
touching 80.61 rand, a level last seen in 2009.
The money is more than half of MTN's market capitalisation,
and analysts said the demand risked further undermining
Nigeria's efforts to shake off an image as a risky frontier
market for international investors.
The crux of the allegation is that MTN used improperly
issued certificates to convert shareholders loans in its
Nigerian unit to preference shares in 2007.
As a result, dividends paid by MTN Nigeria to the parent
company between 2007 and 2015 - amounting to $8.1 billion - are
deemed illegal, and should be returned, Nigeria alleges.
"No dividends have been declared or paid by MTN Nigeria
other than pursuant to certificates of capital importation
issued by our bankers and with the approval of the CBN (Central
Bank of Nigeria) as required by law," MTN said in a statement.
The demand from the central bank has raised worries about
doing business in Nigeria, whose finances have been hit by a
weak economy and volatile oil prices.
"One wonders why this wasn't brought to MTN's attention
years ago. You just can't do business in an environment where
these type of things are going to happen," said Greg Davies of
boutique investment house Cratos Capital in Johannesburg.
The demand also comes ahead of next year's presidential
election in Nigeria in which President Muhammadu Buhari, who
swept to power on promises of tougher regulations, is seeking
"This smells like a central bank that is not independent
from a government that has big fiscal issues," said Byron
Lotter, an analyst at Vestact in Johannesburg. "This is another
huge step backwards for Nigeria."
Nigeria's central bank also fined four banks, including
Standard Bank's unit in Nigeria, Stanbic IBTC
, for their role in moving the money out of Africa's
On Wednesday, the central bank said it had fined Stanbic
IBTC 1.8 billion naira ($6 million) for violations of foreign
exchange transactions rules and ordered that it return $2.6
billion it repatriated on behalf of clients, including MTN.
Standard Bank said in a statement its unit was "not a
beneficiary of any of the remittances made on behalf of clients
and denies any imputation of malfeasance."
Last November, Nigeria's Senate approved a report largely
exonerating MTN following an investigation, after the business
was accused of illegally repatriating $14 billion to its parent
The chief executive of Nigeria's Access Bank said on
Thursday Nigerian banks would meet soon to discuss MTN's $8.1
billion payment and "look for a way to engage government and
regulators to resolve the issue".
Separately, MTN missed its initial public offering target at
its Ghana unit, managing to only raise 1.14 billion cedis
($238.5 million) instead of 3.47 billion cedis.
"The timing is peculiar and bad as the Ghana IPO didn't
raise as much money as they could have and this Nigerian saga
may have spooked investors," Cratos Capital's Davies said.
($1 = 14.6167 rand)
($1 = 305.7000 naira)
(Additional reporting by Patricia Aruo and Nqobile Dludla in
Johannesburg and Chijioke Ohuocha in Lagos; Editing by James
Macharia and Alexandra Hudson)
First Published: 2018-08-30 09:53:19
Updated 2018-08-30 17:56:09
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