MTN’s battles with Nigerian authorities over $10 billion in repatriated funds and back taxes could increase risk in South Africa’s financial system, the country’s Reserve Bank has said.
MTN running crisis in Nigeria has already shaken the company’s share price and resulted in about 20 per cent of the value of the pension fund of teachers in South Africa being wiped away.
Africa’s largest wireless carrier by subscribers is facing mounting pressure to return $8.1 billion to Nigeria after its central bank argued that the Johannesburg-based company had repatriated funds illegally.
Separately, the West African nation’s attorney general’s office alleges the company owes $2 billion in back taxes.
The “near-term repatriation of the funds to the Nigerian authorities could affect MTN’s ability to continue meeting its debt obligations, including those in the South African banking sector,” the South African Reserve Bank said in its Financial Stability Review released Wednesday in the capital, Pretoria. “Given the interconnected nature of the financial system, that could increase systemic risk.”
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The claims amount to almost all of MTN’s market value of about $12 billion, SARB said. That could also lead to a “worst-case scenario” of MTN pulling out of Nigeria, which would increase the company’s exposure level to reputational risk, it added.
Nigeria’s central bank alleged in late August that MTN and four banks — Standard Chartered Plc, Citigroup Inc., Stanbic IBTC Plc and Diamond Bank Plc — illegally repatriated the money from Nigeria. MTN sought an injunction in early September to buy itself time to fight the claim in its biggest market, which has wiped 18 percent off its market value within two weeks.
The shares traded 0.6 percent higher at 89.50 rand at the market close on Wednesday, valuing the company at 169 billion rand ($12.1 billion).
Recently the Nigerian finance minister told a large conference in Abuja that the crisis has been damaging to Nigeria after it became obvious that investors around the world had taken a dim view of Nigeria’s handling of the matter.
Nigeria’s hopes to raise an additional $2.5bn in Eurobond before the end of the year and it is now believed that apart from the impact of the up-coming elections in Nigeria, the bungling by the government of the MTN matter will mean that Africa’s largest economy will pay a higher price for the bond as investors demand a higher premium for the risk in betting on Nigeria.
