MTN $10.1bn dispute with Nigerian govt risky to S/Africa’s financial system —SARB

The disputes between MTN Nigeria and Nigerian authorities over $10 billion in repatriated funds and back taxes could increase risk in South Africa’s financial system depending on the outcome, the South African Reserve Bank (SARB) has said.

MTN Nigeria, a subsidiary of a South Africa-based telecommunication giant, MTN Group, is facing severe pressure from the Central Bank of Nigeria (CBN) to return $8.1 billion it repatriated from Nigeria through illegal means.

Also, the Office of the Attorney General of the Federation (AGF) also demanded a sum of $2 billion in tax arrears from the South African firm, bringing the total claim by the federal government to $10.1 billion.

“The immediate, or at least near-term, repatriation of the funds to the Nigerian authorities could affect MTN Group’s ability to continue meeting its debt obligations, including those in the South African banking sector, which, given the interconnected nature of the financial system, could increase systemic risk,” the South African apex bank said in its Financial Stability Review released Wednesday in the capital, Pretoria.

The claims amount to almost all of MTN’s market value of about $12 billion, SARB stated further.

A “potential worst-case scenario” would be for MTN to pull out of Nigeria, which would increase the company’s exposure level to reputational risk, the Reserve Bank said.

On August 29, the CBN directed MTN to refund $8.1 billion shareholders’ funds it allegedly repatriated from the country through illegal means, while it imposed a combined fine of N5.87 billion on four banks – Standard Chartered Plc, Citigroup Inc., Stanbic IBTC Plc and Diamond Bank Plc – that allegedly aided the process.

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In early September, the teleco, which has Nigeria as its largest market, sought a court injunction restraining CBN from demanding that the amount should be refunded in order to buy itself time and fight the claim which wiped as much as 18 percent off its market value within two weeks.

”In order to protect MTN Nigeria’s assets and shareholder rights within the confines of the law, we have applied today in the Federal High Court of Nigeria for injunctive relief restraining the CBN and the AGF from taking further action in respect of their orders,” the telecom firm said in a statement.

In separate legal documents, the CBN asked the court to deny MTN’s request and said the telecommunication firm should pay 15 percent annualised interest on the sum until the court make a judgment and 10 percent from then until the whole amount is paid.

Last week Tuesday, a Federal High Court sitting in Lagos adjourned hearing in the case between MTN and the AGF over the alleged $2 billion unpaid tax bill till today, Thursday, November 8, while the court adjourned till December 4 to hear the case between the telco and CBN.

 

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