MTN Kicks, Shares Plunge 25%, Banks Call for Calm

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Obinna Chima and Emma Okonji

The shares of the MTN Group took a 25 per cent fall to a nine-year low of 86.50 rand Thursday, a day after the Central Bank of Nigeria (CBN) imposed a hefty $8.1 billion fine on its Nigeria’s subsidiary, MTN Nigeria, for forex infractions.

The shares, listed on the Johannesburg Stock Exchange, had fallen by as low as 31 per cent during the day before recovering to its closing price.

The news of the massive shares fall came shortly after its telecom subsidiary denied its indictment by the CBN that it collaborated with Standard Chartered Bank Nigeria, Citibank, Stanbic IBTC and Diamond Bank Plc to illegally repatriate $8.134 billion between 2007 and 2015 from the country.

However, three of the four banks involved in the matter, Standard Chartered Bank, Diamond Bank and Stanbic IBTC, in separate statements Thursday, advised their investors and stakeholders not to panic, saying the matter would be resolved.

The CBN had on Wednesday slammed a fine of N5.87 billion on the four banks over 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.

The CBN had indicated that the highest fine of N2,470,604,767.13 was slammed on Standard Chartered Bank, while Stanbic IBTC Nigeria was fined N1,885,852,847.45.

For its punishment, Citibank got N1,265,541,562.31 fine, just as Diamond Bank was directed to pay N250 million for violating extant rules.

In line with the fine on the banks, the CBN also directed MTN Nigeria to immediately refund $8,134,312,397.63 illegally repatriated by the telecoms company to the coffers of CBN.

MTN in a statement signed by its Public Relations Manager, Mr. Funso Aina, insisted that it got the approval of the CBN for all dividends it declared in the past, and that the Senate investigation on alleged funds repatriation had since exonerated it from any complicity in illegal funds transfer.

The telecoms company said it would continue to engage relevant authorities and would vigorously defend its position on the matter and provide further information when available.

According to the statement, “MTN Nigeria Communications Limited (MTN Nigeria) received a letter on 29 August 2018 from CBN alleging that Certificates of Capital Importation (CCIs) issued in respect of the conversion of shareholders’ loans in MTN Nigeria to preference shares in 2007 had been improperly issued.

“As a consequence, they claim that historic dividends repatriated by MTN Nigeria between 2007 and 2015 amounting to $8.1 billion need to be refunded to the CBN.

“MTN Nigeria strongly refutes these allegations and claims. No dividends have been declared or paid by MTN Nigeria other than pursuant to CCIs issued by our bankers and with the approval of the CBN as required by law.

“The issues surrounding the CCIs have already been the subject of a thorough enquiry by the Senate of Nigeria. In September 2016 the Senate mandated the Committee on Banking, Insurance and other Financial Institutions to carry out a holistic investigation on compliance with the Foreign exchange (monitoring and miscellaneous) Act by MTN Nigeria and others.

“In its report issued in November 2017, the findings evidenced that MTN Nigeria did not collude to contravene the foreign exchange laws and there were no negative recommendations made against MTN Nigeria.

“MTN Nigeria, as a law-abiding citizen of Nigeria, is committed to good governance and to abiding by the extant laws of the Federal Republic of Nigeria.

“The re-emergence of these issues is regrettable as it damages investor confidence and, by extension, inhibits the growth and development of the Nigerian economy.”

The senator representing Kogi West, Senator Dino Melaye, had in the past, accused MTN of illegally repatriating $13.92 billion over a decade starting in 2006, which triggered the Senate investigation.

The Senate investigation committee had, however, ruled that allegations of illegal repatriation of $13.92 billion were unfounded and that MTN did not violate the law.

On its part, Stanbic IBTC Holdings Plc, in a notice to the Nigerian Stock Exchange (NSE), said it is currently engaging with the CBN with a view to resolving the matter.

“The bank is holding further engagements with the CBN, in relation to the issues it has raised. Please be assured that the above does not impact on your ability to continue to conduct your various business and corporate transactions with Stanbic IBTC Holdings or any of its subsidiaries, including the bank,” it explained in statement that was signed by its Company Secretary, Mr. Chidi Okezie.

Also, Diamond Bank Plc in a statement signed by its Company Secretary, Mr. Uzoma Uja, notified the NSE of the fine and said it was cooperating with the apex regulator to ensure that the matter was resolved.

It explained: “This development does not impact your ability to continue to do business with the bank. Updates on any new development will be made available to all stakeholders.

“We want to assure all stakeholders that the bank complies with all regulatory policies issued.”

Similarly, Standard Chartered Bank Nigeria in a two-paragraph statement noted, “As previously disclosed, we are committed to fully co-operating with the regulators on this matter. Whilst we cannot provide additional information due to ongoing engagement with the regulators, we look forward to a rapid resolution and satisfactory outcome of this matter.”

Impact of Fines on Shares

Commenting on the action of the CBN, Lagos-based CSL Stockbrokers Limited, stated that the impact of the N5.9 billion fines imposed on the banks would not be material, “at least for the banks under our coverage (Stanbic IBTC and Diamond Bank).”

According to the firm, the amount is not large enough to pose a threat to their financial stability and/or near-term profitability.

“We however note that most of the banks – Access Bank, Diamond Bank, Fidelity Bank, FBN Holdings, FCMB, GTBank, Stanbic IBTC, United Bank for Africa, and Zenith Bank – are significantly exposed to MTN and some have shareholdings in the company, implying that the risk to the banks if this is not favourably resolved, may be more than just the payment of the fines imposed.”

On CBN’s directive for MTN to refund the stated sum, CSL Stockbrokers noted that: “This appears impossible given that the funds have long been distributed to shareholders and lenders over time, and cannot be practically raised by MTN itself without major disruptions to its business.

“We believe the regulator may resort to imposing a fine on MTN (which will materially impact profitability), or restrict future repatriation of funds by MTN, with the attendant effect on its foreign lenders and shareholders.

“For MTN, the market is not taking the CBN’s directive lightly. Panic sales appear to have been triggered with MTN Group’s share price. Of particular concern, the CBN’s refund directive given to MTN could potentially impact its Initial Public Offering (IPO) in Nigeria – which was expected to have commenced this month – and heightens the risk of an IPO undersubscription. That said, Nigeria remains the bright spot in Africa’s telecom market with MTN holding the dominant position with an estimated 54 million customers out of 221 million worldwide, implying an opportunity for investors to take up IPO shares may be too good to pass up.”