Will CBN Sanction on MTN, Four Banks,  EFCC’s Attempted Raid  on Standard Chartered Bank Affect Investor Confidence?


Following the recent punitive measure by the Central Bank of Nigeria (CBN) against MTN Nigeria and four banks over foreign exchange infraction in repatriation of funds for the telecoms company, experts have weighed its implications on investor confidence in the economy. Kunle Aderinokun, Olaseni Durojaiye and James Emejo report 

MTN was again in the eye of the storm last week following the imposition of financial sanction against it over the illegal repatriation of $8.13 billion from Nigeria in violation of the extant laws and regulations.

The CBN ordered MTN to immediately make a refund of the amount and, in addition, axed Standard Chartered Bank, Citibank Nigeria Limited, Stanbic IBTC Bank Limited and Diamond Bank Plc for their roles in facilitating the illegal repatriation of the funds by MTN between 2007 and 2015.

The apex bank’s hammer on the South African telecoms company came as it still struggles to complete payment of the N1.04 trillion fine imposed on it in 2015 by the Nigerian Communications Commission (NCC) for violation of SIM card registration order, thereby undermining national security.

Although the N1.04 trillion was later reduced to N330 billion after several plea bargain from MTN Nigeria, and the payment plan staggered and spread over a period of four years, MTN is yet to complete the payment, before courting fresh fines from the banking sector regulator.

And to further compound the situation for MTN, the Federal Government had, in a separate development, directed it to pay $2 billion in import duties, VAT and withholding taxes on foreign imports/payments incurred within the past 10 years.

But the action of CBN over the infraction on capital repatriation guidelines does not really come as a huge surprise, given the efforts it had so far made in restoring calm to the crisis that recently rocked the FX market occasioned by scarcity of foreign exchange especially the United States Dollar in the heat of the recession.

The CBN faced several allegations and persecutions from the public as it became difficult to meet huge dollar demands amid declining foreign reserves, a situation which prompted the apex bank to limit FX access to the now famous 41 items and also restricted FX for overseas school fees among others. Some of these restrictions have, however, been relaxed.

Therefore, it is believed that the repatriation of such funds by MTN, albeit illegality had the potential to evade the CBN monitoring radar and this practice, if allowed unpunished could fuel distortions in FX with its attendant implications on the economy. 

However, given that Nigeria is in dire need of foreign direct investments (FDIs), especially after exiting an economic recession, and amid declining growth in Gross Domestic Product (GDP) in the second quarter, analysts have expressed mixed views on the possible impact of the sanction on investor confidence going forward. 

Already, the CBN Governor, Mr. Godwin Emefiele, had tried to douse the tension, which could be generated among investors following the current travails of MTN as a result of the regulatory decisions taken recently by assuring both foreign and local investment community and all financial institutions that it would continue to honour and maintain the integrity of all valid Certificates of Capital Importation (CCIs) already issued. This is, however, with the exception of those in violation of the 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.

Commenting on the development, Director, Union Capital Market Ltd, Egie Akpata, downplayed the impact of the sanction on investor confidence.

He told THISDAY:”I don’t think we have enough information to make conclusive statements on what made the CBN take those actions on MTN. The CBN response might be justifiable but the optics around how it was communicated leave much to be desired. I really don’t think this action has much impact on investor confidence.

“The market is able to realise that these actions are simply against one company, which might have breached certain regulations. If we had actions against entire industry groups, then it would been more worrying. If anything at all, this action shows that regulatory compliance is now very important in Nigeria  and  complex multinationals need to invest more in personnel and systems that will help ensure regulatory infractions are minimised.”

Also, an economist, Dr. Anthony Aziegbemi, said investors might welcome the sanction, if done in good faith by the regulator.

”My take on the CBN sanction on MTN and four banks: The CBN in line with the statutes has the powers to investigate and sanction as in this case where necessary. To that extent, they are in order. However, the accused organisations have a right to seek redress in the law courts if they feel that they have been treated unfairly,” he posited.

“My initial reaction, though, was that the money-strapped APC were looking for money for the 2019 elections. I don’t think that is the case here. Genuine investors will not be perturbed as long as the sanctions are in line with law. What, they do not want is where arbitrariness reigns,” he added.

In the same vein, former Managing Director of Unity Bank Plc, Dr. Mohammed Rislanudeen said the action of the CBN would have positive effects on the economy and bring sanity to the business environment.

He said: “To me, the action of the central bank is highly commendable and it should be an eye opener to regulatory agencies in ensuring those that do business in Nigeria comply with our extant laws or face severe sanction. What this has shown is that perhaps what was discovered may be a tip of an iceberg.

”Off-site regulatory supervision need to be further strengthened by CBN to deal with this and similar other infractions. Such kind of leakages are reasons why our foreign reserves will not get to reach its optimal potential of having the capacity to deal with shocks of price or output movements in crude petroleum market, our major foreign exchange earner. That kind of leakages does compel the government to borrow funds to finance critical infrastructure needs. This also has direct effect on capacity of real sector to grow as they face scarcity of foreign exchange to import critical inputs that will support growth and employment generation.”

He added: “The leakage also has negative effect on our GDP growth rate. The action of CBN will have  positive effect on the economy as it send the right signal that businesses are welcome to Nigeria, but must operate within our established laws like in any other country. We should not, based on narrow prism of encouraging foreign direct investments, allow foreign businesses to exploit our weaknesses and break our rules with impunity.”

But, a Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Prof. Uche Uwaleke, said the CBN sanctions on MTN could impair investor confidence as banks’ stocks had already been affected as a result. 

According to him:”The CBN sanctions will obviously have some dampening effects on investor confidence in Nigeria especially in relation to banking stocks. Already, the share prices of the quoted deposit money banks among them namely FCMB and Diamond Banks have witnessed some declines since the news broke. 

“There is also the possibility that this development will delay the plan that is afoot to get MTN listed on the Nigerian Stock Exchange. 

“However, the impact may not be significant given the few number of banks involved relative to the total number operating in the country. 

“Also, the fines are not such that could significantly affect the bottom lines of the banks or cause any systemic crisis.”

Also, in an interview with THISDAY, Chief Executive, Global Analytics Consulting Limited, Mr. Tope Fasua, further looked at the situation differently, accusing the CBN of regulatory lapses adding that it could impair the perception of foreign investors given the recurring issue with MTN.  

According to him, “For the kind of volumes involved, it may amount to a self-indictment on the part of CBN because only a comprehensive systems failure could lead to months or years of falsification and fraud as claimed. $8billion is a lot of money. 

“The entire story may not be palatable for foreign investors, given the frequent run-ins with MTN in particular. It wasn’t long ago that the company had to pay huge fines for not keeping proper records of its customers. 

“However, we needn’t always be cowed by the prospects of losing foreign investments to the extent that our regulators will become afraid of doing their jobs.”

Also, speaking on CNBC Africa, Chief Executive, CFG Advisory, Mr. Tilewa Adebajo, described the development as “a major earthquake” adding that, “allegations are very serious and the consequences are very dire.”

He said: “It’s a major earthquake; the issues here are very serious. For the CBN to come up with all these allegations and these numbers, it has taken its time to review those numbers.

“The direct impact: as you know, MTN was supposed to do the listing on the Nigerian Stock Exchange, that will be stalled.

“And from the aftermath of the previous $1 billion dollar fine, MTN is still trying to recover from that and issues now around investor confidence in Nigeria and we need to look at how these would turn out. We need to look at more details. The allegations are very serious and consequences are very dire. “

With the MTN saga still very much on the front burner, 20 operatives of the Economic and Financial Crimes Commission (EFCC) on Friday, stormed the head office of Standard Chartered Bank, another foreign entity, ostensibly to arrest top executives of the bank.

The news of invasion immediately caused turmoil among the investor community as many operators in the nation’s Capital Market feared that the action would further hurt investors’ confidence and would further accelerate foreign portfolio flight from the economy.

It took the swift intervention of the CBN Governor Godwin Emefiele to bring the situation under control. THISDAY gathered that Emefiele made frantic calls to the EFCC Chairman, Ibrahim Magu who said he was unaware of the raid. Magu then called off EFCC’s operatives from the bank’s premises.

Emefiele insisted to Magu and the Attorney General of the Federation and Minister of Justice, Abubakar Malami that the issue with Standard Chartered Bank was regulatory and not criminal.