Africa’s leading communications network provider, MTN Group has been in the forefront of Nigeria’s telecommunications industry, expanding its presence throughout Nigeria. But, unfortunately, the company has also had its fair share of controversies, particularly in its Nigerian unit.
On Wednesday, the company was slammed with a huge fine by Nigeria’s apex bank and financial regulator, the Central bank of Nigeria (CBN) for violating extant laws and regulations on foreign exchange in the country.
This comes after the CBN ordered an investigation to unearth the inconspicuous aspects of the incident which took place two years ago. CBN imposed a fine of N5.87 billion on four banks for allegedly repatriating 8.1 billion USD and asked MTN to return the total amount moved through those banks. Hence, the Central Bank has directed all affected banks (Standard Chartered Bank, Citigroup, Diamond bank and Stanbic IBTC) to refund 8.1 billion USD which was transferred during the height of the 2016 economic recession.
CBN in a statement released on Wednesday said it took this step after its investigations revealed “flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006.”
Even though a report from Nigeria’s legislature exonerated the service provider over the repatriation of $13.92 billion to its parent company in South Africa between 2006 and 2016, MTN was still being watched closely by regulators. The vindictive report gave the top hierarchy in MTN and many of its investors a huge sigh of relief, considering the fact that an alleged conspiracy with any banks could have led to a huge loss.
However, it seems they may be caught in another web of controversy with the Nigerian government, with a planned IPO still in the works. The recent directive might see the hope of many of its potential investors fade and subsequently signal a big blow for the MTN group. Already, MTN Group’s shares in trade plummeted by 19 percent as the market opened on Thursday.
Nigeria operates a free market economy system which aids trading and ease of doing business in the country. And for this reason, the country has fast become a fertile land for foreign investments over the years.
The tremendous influx of foreign investors and multinational corporations substantiate this fact, however, the illicit flow of cash is being jealousy guided by the CBN to safeguard the country’s currency and foreign reserve.
No doubt, the eagle-eyed CBN may have captured MTN and four banks, however, the reality is that this development could affect Nigeria’s business environment and scare off investors. Although, the regulator said in its statement that MTN illegally converted shareholders’ loan to preference shares (interest free loan) of $399,594,146.00, while the sum of $8,134,312,397.63 was illegally repatriated on behalf of MTN by its banker between 2007 and 2015, foreign companies fear that this will disrupt the ease of doing business in Nigeria.
According to Daniel Chimezie, an Economist and policy researcher, “Unmitigated outflow of foreign currency hurts our reserve level, our import cover and the Central Bank’s ability to maintain the stability of the naira. It is good for us,” he said. “MTN must play by the rules if it must do business here. We won’t condone corporate irresponsibility.”
Until the issue subsides, MTN which accounted for 27.2 percent of the group’s revenue last year won’t be able to repatriate money out of Nigeria, and this might prompt the telecommunications giant to completely amend its dividend.