While interested parties await findings of the Senate Committee on Banking, Insurance and Other Financial Institutions investigating the alleged illegal repatriation of profits by MTN Nigeria, Olaseni Durojaiye examines the issues surrounding the implementation of capital importation policy
The scarcity of foreign exchange that plagued the nation’s economy for the better part of last year and the consequential challenges attracted all manners of suggestions from economists and policy analysts for the better part of 2016. One germane position was the need to drive foreign investments through capital importation and autonomous forex inflow into the country.
The two arguments hold water, no doubt, but the more valuable of the two arguably, remains the former. Important as the two positions are to driving the initiative to rev up the availability of forex in the economy, many pundits continue to insist that achieving the objective rest majorly on putting in place a robust and realistic monetary policy.
Proponents of this argument contended that pursuing foreign investment without a clear cut policy that will assure prospective investors that they can repatriate their profit as and when they want to without bottlenecks is very important. They argued further that a monetary policy that fail in that regards would render whatever international road shows aimed at attracting foreign investments into the country useless because capital is known to go to markets where the investment climates are favourable and less cumbersome.
Given so, credits must be accorded the present administration, particularly in its efforts to improve ease of doing business in the country. The presidential committee on ease of doing business chaired by the Vice President, Professor Yemi Osinbajo, is a clear commitment of the government to the effect.
However, how existing foreign investments in the country are treated by government at all levels also has a role to play in attracting new ones. The fact was buttressed by the Corporate Relations Director of a leading brewing concern in an interview with THISDAY many months back when he stated that the value that the brewing business brings to the country includes helping to attract new businesses through referrals and positive advice.
Interrogating how existing businesses in the country are treated by attracting new investments into the country brings to the fore the fate of MTN and the case of illegal repatriation of profits.
Analysts are in unison that, any government would guard against illegal repatriation of profits, especially in foreign exchange at a time the local economy is struggling to cope with the challenge of foreign exchange shortage in the system, and as such would not blame the government for beaming its searchlight on the transaction.
Even then, a couple of financial services sector analysts who spoke to THISDAY opined that a holistic interrogation of the transaction and issues surrounding it would requires revisiting the extant laws guarding the capital importation and profit repatriation in the country including the Nigerian Investment Promotion Council (NIPC) laws.
Certificate of Capital Importation
The Certificate of Capital Importation (CCI) is a document from the bank that processes the receipt of a foreign investment capital into Nigeria. It says the day on which the cash arrived, how much it was, and how much local currency the bank converted it into. One analyst described it thus “It is akin to a receipt or any other certificate that authorities in this country are supposed to issue to authenticate a transaction, but in this case, foreign direct investment.”
Another analyst familiar with the issue explained that the investigation by the Senate into the transaction is “a needless dissipation of quality time and scarce resources” arguing that, “I state so because Nigerian Investment Promotion Council Act and the Foreign Exchange (Monitoring and Miscellaneous Provisions Act), are very clear on what the right of an investor is in Nigeria.”
Continuing the analyst, who works for a Lagos based economic research firm stated that, “Section 24 of the NIPC Act says “… a foreign investor in an enterprise to which this Act applies shall be guaranteed unconditional transferability of funds through any authorised dealer in freely convertible currency of (a) dividends and profits (net of all taxes) attributable to the investment….
“Section 15 of the FEMMPA in addition to spelling out whose responsibility it is to issue the CCI, “Foreign currency imported into Nigeria and invested in any enterprise pursuant to subsection (1) of this section shall be guaranteed unconditional transferability of funds, through an Authorised Dealer in freely convertible currency, relating to— (a) dividends or profits (net of taxes) attributable to the investment…”
The analyst further explained that the import of both section of the relevant laws is that if a foreign investor has brought in foreign investment, as long as he has paid all the relevant taxes, he can repatriate all his dividends or profits adding that the needful is to review the laws and not penalise the company.
Intervention of the Senate
Disturbed by the avalanche of views that the issue generated in both print and electronic media in the last quarter of 2016, it is not surprising that the Senate elected to wade into the issue as part of its oversight function as contained in the nation’s constitution through its relevant committee.
While the investigation could not be said to be outside of the purview of the upper chamber, it is noteworthy that, particularly in the age of globalisation and free trade that all foreign company subsidiaries established in Nigeria have it as a primary aim to send profits and dividends back home. If profits and dividends cannot be converted and transferred freely as Nigerian laws currently provide, foreign investors have little incentives to come here.
Against this background, some analysts argued that government has no business with the dividends and profits of a company and insisted that the only legitimate question the Senate can pose here is whether or not a foreign company under investigation paid all the required taxes?
It will be recalled that at the height of the matter, the company denied that it illegally repatriated US$13.92 billion out of the country through its bankers between 2006 and 2016 while pointing out that it has invested over US$16 billion in the country between a space of 10 years.
In its response, obtained by THISDAY, the firm noted that various MTN entities incorporated in different jurisdictions appear to have been confused, stating that MTN Limited (MTN) is a company incorporated in South Africa and is the parent company of MTNN. MTN is however not a shareholder in MTNN and as such has not repatriated any funds out of Nigeria. The statement also explained that MTN International (Mauritius) Limited (“MTNI”) is a company incorporated in Mauritius and is a shareholder in MTNN.
According to the statement, “US$284,906,275.96, which was imported by investors in MTNN, was ultimately paid to NCC. Although a further US$117,683,987 was imported by MTNN shareholders as investment in MTNN, the funds were imported in several tranches between 2001 and 2006. A total of US$402,590,262.96 was imported into the country for investment in MTNN by the MTNN shareholders. These monies were imported at several instances and not in three tranches. The capital was imported over a period of over 10 years via three banks – Standard Chartered Bank, Diamond Bank Plc and Nigeria International Bank (Citibank)”, the statement read in part.
The statement further stated that “MTN complied with extant laws and regulations adding that requests for CCIs are continuing events – made as-and-when brought-in.
Continuing, the statement added that, “That Standard Chartered Bank Nigeria, as an entity regulated and supervised by the CBN, made the prescribed returns to the CBN within the prescribed time of receipt and conversion of the funds. We are not aware that the CBN has at any time queried the bank for any default in this regard.
”MTNN categorically denies all suggestions or allegations that its bankers in violation of the FEMM Act and Foreign Exchange Manual, repatriated US$13.92 billion illegally out of Nigeria. All monies repatriated by MTNN were in respect of dividend payments and capital divestments originating from legitimate foreign direct investment into MTNN; and were done in compliance with extant laws and regulations.
As the Senate prepares its findings, observers argued that it would be inappropriate to penalise the telecommunications firm and argued that going by the dictates of the extant laws guiding the repatriation of capital, the firm didn’t contravene any section of the laws.
Some of the analysts that spoke to THISDAY, argued that rather than penalise the firm, the situation calls for a revisit of the laws guiding capital importation and repatriation of profits with particular emphasis on what percentage of the profits to be returned to home countries of foreign firms doing business in the country.
Analysts also maintained that, “Besides the facts surrounding the case, the reality is that Nigeria cannot afford to wield the big stick on MTNN on this matter; doing so may have negative effect on the ability to attract more foreign investments and the economy. Again, doing so after the unprecedented fine imposed on it in the recent past, may send the wrong signal out to prospective foreign investors into the country; some of them could even perceive it as targeting the firm,” he stated.
Another analyst based in Port Harcourt, Rivers State, Ezeh Wordu, argued that “If the Senate decides to sanction MTNN that may affect the economy and I say so bearing in mind the following: MTNN has contributed immensely to the growth of the nation’s Economy.
The firm’s equity contribution to the economy is in the range of $402,035,000; the debt capital of about N329 billion, and offshore loan capital of $1,297,000,000.MTNN is the carrier of certain government platforms, airlines, oil companies, other telecommunications companies, and has either directly or indirectly created over 500,000 jobs in Nigeria.