After authorities in Nigeria said they were working towards an amicable solution to the fines imposed on MTN Nigeria, the company’s South African stocks recovered to their best level in more than two weeks. When the Nigerian central bank confirmed it was working towards finding a solution, the company’s shares which dropped below 70 rand for the first time in 12 years, closed 6.5 percent up at 78.17 rand.
Peter Takaendesa, Mergence Investment Managers portfolio manager, said “any news of a potential resolution should be supportive of the share price”. In August 2018, when MTN’s shares was at 107.34 rand, the Central Bank of Nigeria told MTN Nigeria it had to return $8.1 billion worth of dividends it repatriated illegally between 2007 and 2015. The apex bank also fined four banks, including the Nigerian unit of Standard Bank for their role in transferring the funds.
In less than a week, Nigeria’s Attorney General also said MTN Nigeria owed $2 billion in unpaid taxes.
MTN Nigeria said the central banks’s allegations were untrue. The company claims the dividends it moved out are ordinary dividends.
The central bank said it was engaging MTN and its four banking partners. The country’s central bank noted that “additional information is currently being reviewed with a view to arriving at an equitable resolution”.
Rob Shuter, MTN’s CEO said “we are absolutely convinced that we can make that case”. The company had managed to negotiate a better deal after it was fined $5.2 billion by Nigerian authorities in 2015 for failing to disconnect unregistered SIM cards. The fine was reduced to a little over $1 billion.
Another source also revealed to BusinessDay South Africa that the attorney general’s tax demand was based on rudimentary calculations that wrongly assumed withholding taxes and value added taxes were applicable to all foreign payments.
In a statement released by the central bank, it assured investors that “the integrity of the foreign exchange regime remains sacrosanct and there will be no retroactive application of foreign exchange rules and regulations”. The bank also revealed it welcomed all legitimate investors willing to take advantage of the investment opportunities in Nigeria.