With only two weeks to the December 31 deadline for the payment of N3.9 billion fine on MTN Nigeria by the Nigerian Communications Commission (NCC), analysts at WSTC Financial Services Limited have raised concern on the implication on foreign direct investment (FDI).
“Regardless of how MTN eventually resolves the fine, we believe that the situation does not bode well for perceptions about investments (both local private capital and FDIs) in the country,” they said in a report.
It is certain that the company will either pay on or before the deadline date or default outrightly, the analysts believe that a default may technically imply an exit of the company from the Nigerian market as they doubt the ability of MTN Nigeria in raising such an amount from Nigerian banks, given the constraints that will be imposed by both single obligor limit of banks and the size of the amount involved relative to the company’s normalised cashflows.
Olusola Oni and Motunrayo Giwa, analysts at WSTC, say that the fine may threaten the continued existence (as a going concern) of one of the most prominent FDI stories in the country.
“We are not aware of any instance in world corporate history where a regulatory corporate fine immediately bankrupts the offending entity,” they say.
However, they condemn in strong terms the form of corporate unruliness or laxity in corporate governance that was exhibited by MTN in flouting the “mutually agreed” rules on the infractions.
“We are of the opinion that regulatory sanctions should be guided by due considerations to the proportionality of sanctions in relation to the offence, and to a reasonable extent, the operational capacity of the liable entity,” the analysts say.
