There are indications that the MTN Group will now focus on listing its Nigerian subsidiary on the Nigerian Stock Exchange (NSE) now that it has settled its US$8.1 billion dispute with the Central Bank of Nigeria (CBN).
The CBN had in August sanctioned MTN Nigeria Communications Limited, and four commercial banks for what it called “flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 and the Foreign Exchange Manual, 2006.”
The CBN had asked MTN Nigeria to refund of about $8.13 billion allegedly repatriated illegally out of Nigeria while directing Standard Chartered was asked to refund N2.5 billion; Stanbic IBTC (N1.9 billion); Citibank (N1.3 billion and Diamond Bank (N250 million).
Before the sanctions, MTN had initiated plans to have its Nigerian subsidiary listed on the Nigerian Stock Exchange by August 2018 and had gone ahead to appoint advisers to the issue.
MTN picked Chapel Hill Denham as lead manager, while South Africa’s Rand Merchant Bank, Renaissance Capital and Vetiva Capital were chosen as joint issuers. But the CBN sanctions, which if implemented could have grounded the company’s operations in the country, forced a postponement of all talks about the listing. Sources close to MTN have told BusinessDay that now that the CBN issue has been resolved, MTN would now revive the listing process. But the expectation is that any listing may only take place after the 2019 elections and most likely in the third quarter of 2019.
MTN had in 2017 agreed to list its Nigerian subsidiary, as part of a settlement with the Nigerian government over unregistered SIM cards for which it was fined $1.7 billion. So it is mandated to go ahead with the listing or the Nigerian Communications Commission (NCC) could intervene and force it to list.
In July, the Securities and Exchange Commission (SEC), the apex regulator for Nigeria’s capital market, said that MTN was yet to file application for listing with it. MTN is currently a privately held company and must also convert to a public limited company before filing an application with the SEC for listing on the NSE. The resolution of its dispute with CBN paves a way for the process to begin.
In a statement issued by MTN on December 24, it announced that the MTN Group has reached an agreement with the CBN to resolved its US$8.1 billion dispute.
MTN Group said on its twitter handle that it made a N19.2 billion ($53m) payment, and is “engaging with banks regarding the agreement.”
Responding to the settlement reached, Bismarck Rewane, CEO of economics consulting firm Financial Derivatives Company (FDC) said it is a “very good development and will help repair part of the self-inflicted damage.”
The CBN reached the agreement with MTN on the basis of new information received that shows no wrong was done by MTN regarding most of the repatriations, except for $1 billion involving repatriation of proceeds from a Private Placement it undertook, using improperly issued Certificate of Capital Importation or CCIs.
“The CBN and MTNN have mutually agreed that the aforementioned transaction be reversed notionally to bring it into full compliance with foreign exchange laws and regulations. The parties have resolved that execution of the terms of the agreement will lead to amicable disposal of the pending legal suit between the parties and final resolution of the matter,” Isaac Okorafor, Director, Corporate Communications, CBN said in a statement.
“The CBN assures foreign investors that the integrity of the CCIs issued by authorized dealers remain sacrosanct. Potential investors are encouraged to take advantage of the enormous investment opportunities that abound within Nigeria.”
BusinessDay learnt that the CBN does not typically review decisions it has made but decided to do so this time because it does not regulate MTN.
The initial announcement from the CBN was for MTN to refund $8.1 billion.
“We are very comfortable with the fine and new agreement,” Pascal Dozie, Chairman of MTN Nigeria, told BusinessDay.
Omotola Abimbola, a research analyst at Ecobank, said it is a good thing that both parties were able to reach a reasonable agreement.
But he further explained that “perhaps the situation could have been better managed without having an impact on Nigeria’s investment attractiveness, because MTN is a global company and this issue went far and wide. So it has had an impact on investors’ perception towards Nigeria.”
MTN however advised shareholders that the legal process initiated by MTN Nigeria for injunctive relief restraining the AGF from taking further action in respect of its orders for back taxes is continuing.
The AGF matter came up for initial mention before the Federal High Court of Nigeria Lagos Judicial Division on 8 November 2018 and has been adjourned to 7 February 2019.
“MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment, as claimed by the AGF, is due, and consequently no provisions or contingent liabilities are being raised in the accounts of MTN Nigeria for the AGF back taxes claim. As a result of the above, shareholders are no longer required to exercise caution in dealing with the Company securities,” MTN said.
“This is positive for Nigeria’s image abroad as well as MTN’s investors. We expect this to impact positively on its shares after the Christmas break. In addition, This will improve foreign investor confidence. MTN may begin talks on its listing initiative on the Nigerian bourse. Though, most of these activities may occur after the 2019 General Elections,” said Ayodeji Ebo, MD, Afrinvest Securities Limited.
ENDURANCE OKAFOR
