In this piece, James Emejo
reviews the recent resolve by the Central Bank of Nigeria to reverse its
decision on MTN Nigeria to refund the $8.1 billion the company was
accused to have repatriated illegally
In August, the Centra; Bank of Nigeria
sanctioned MTN Nigeria over alleged illegal repatriation of $8.1 billion
from the country to its parent company in South Africa, in violation of
the extant laws and regulations.
After an extensive investigation into
the alleged infraction, the apex bank had demanded that the $8.1 billion
be refunded with immediate effect to the CBN.
Also affected by the sanctions were four
Nigerian banks, namely Standard Chartered Bank, Citibank Nigeria
Limited, Stanbic IBTC Bank Limited and Diamond Bank Plc – which
allegedly aided the repatriation between 2007 and 2015, despite the fact
that the telecoms giant was in violation of the extant Nigerian foreign
exchange and anti-money laundering laws.
However, the telecoms company
immediately denied the allegations that it repatriated foreign exchange
unlawfully from its Nigerian operations.
Notwithstanding, shares of the MTN Group
dropped 23 per cent to a nine-year low, following the CBN announcement
of sanctions against the South African company.
The situation also raised concerns that
the confidence of international investors might have been badly impaired
by the development.
For one, it implies that investors may not freely move in their monies and exit at will.
But, CBN made spirited attempts to douse
the tension, assuring investors that the sanctity of Certificates of
Capital Importation (CCIs) remained sacrosanct and will be respected.
Following a sustained protest by MTN,
which felt it had done nothing wrong regarding the accusation- and
constrained by growing criticism even by the government regarding the
negative impact on Foreign Direct Investment (FDI) into the country, the
CBN was forced to reconsider its decision.
Consequently, at the September meeting
of the Monetary Policy Committee (MPC), CBN Governor, Godwin Emefiele,
assured that it was engaging with MTN and other stakeholders to give
them the opportunity to prove their case over the alleged illegal
repatriation.
According to him, the CBN was engaging with affected parties to afford them the opportunity for fair hearing.
He predicted that the outcome of the engagement will leave all parties satisfied.
Emefiele had said: “First, it’s
important for us to know that the fine- $8.1 billion is dollar
equivalent of MTN’s naira generated from their profit. So I will neither
call it a fine or a penalty.
“What CBN sought by asking MTN to return
that money is that we want a reversal of that transaction because it
was not finally authorised by the CBN and that’s what we sought to do.
“And because those funds moved through
these four banks, the quantum of dollars that passed through the banks
was what we said the banks needed to remit back or the company needed to
remit back to CBN through the banks.
“It didn’t mean that these were the
banks’ obligation and we understand that there were some interpretations
in some quarters that aside from the naira penalty, that there were
some conclusions that those dollars said to have been remitted by these
banks on behalf of this company were indeed the liabilities of the
banks.
“And that’s the reason we provided a
clarification to the banks when they called us that that liability is
indeed that of MTN and not theirs: and that CBN was not in any position
or in any way going to debit the banks for the dollar because it was not
and it’s not meant to be their liability.”
According to him, it is important to
know that this was an investigation that started over two years ago;
there were a number of issues; about two of the issues we’ve decided to
allow it a dispensation to say let it go.
“But on this last one, we thought the
amount was large and that there’s a need for us to subject this to
further investigation and discussions.”
He said, “Yes, I feel vindicated that in
the history of the banking industry, at least I gave a chance where the
regulator – governor sitting in the meeting, deputy governors, director
of banking supervision and over 20 examiners sitting in a hall with a
company and the banks, asking them to resolve the issues because we
admit that MTN is a systemically important telecoms company in Nigeria.
“And after that meeting we held on May
25, 2018, the discussion was inconclusive- we gave the company and the
banks one week, which was meant to be the end of May; it was not done
but also realising the importance of this company so that we will not
jolt the system, we gave almost extra two months for them to provide
relevant documentation to the examiners so they can knock those items
out of their outstanding item.
“Unfortunately, this didn’t happen and
we felt that we couldn’t wait indefinitely. And that was the reason we
released the investigation report to the banks and the company. They’ve
now responded and provided documents which I have sent down to examiners
to now begin to review. And I repeat; we will go through the pain again
to invite the banks and invite the company to prove their case because
it’s just normal that we should allow these company and the banks to
clear themselves. That’s what we are doing and I believe in due course,
we should make a final call on this subject,” he added.
Reassuring on the flexibility of the
investment policy particularly as it concerns foreign exchange, the
governor noted: ”And it’s important for me to say and repeat at this
meeting that the sanctity of our CCIs remain sacrosanct; at a time CCIs
were being issued by CBN, but in order to provide a transparent system,
we migrated the process to banks issuing the CCI.
“Today, we’ve migrated this into what we
call the electronic CCIs- so that tells you how transparent we are on
this subject. And I repeat, the sanctity of CCIs remain sacrosanct;
we’ll respect CCIs, but again, it’s important that people should please
as much as possible ensure that they do what’s right, obey the extant
laws and foreign exchange regulations of our country. We will resolve
this matter; I’m very optimistic we’ll resolve the matter and I believe
that everybody will be happy: MTN will be happy, the banks will be happy
and CBN and government will be happy.”
The CBN reassurance notwithstanding, in
October, the federal government again publicly expressed reservations
over the MTN repatriation controversy.
Minister of Finance, Zainab Ahmed,
admitted that the recent CBN directive on $8.1 billion refund to MTN
Nigeria and the fines imposed on four other banks over foreign exchange
infractions has had a negative impact on investors’ confidence in the
economy.
She hinted that authorities had since been working to offer some explanation to investors on how the matter was being resolved.
Ahmed said the government could not afford to allow a repeat of the development because of its implications for the economy.
She said, “Unfortunately this was
negative for us, but it’s now being sorted out and we are bearing the
cost of it. We have been engaging investors and trying to explain what
is happening.”
Speaking during a panel session on
“Sustainable Economic Opportunities: Ending the Vicious Cycle”, at the
24th Nigerian Economic Summit, she added, however, that the issue was
currently being sorted out.
The minister further foreclosed suggestions that more companies may also be punished for similar infractions.
She submitted that the MTN incident had a damaging effect on the reputation of the country.
She had said: “We are trying to make
sure that this doesn’t happen again. We are continuously discussing with
the regulatory authorities and there will be no company next after MTN.
Nobody is next because we just can’t afford this kind of incidence to
happen.
“The MTN incident was a very damaging
one for us and that was one of the reasons why we have been out trying
to engage our investors. But you see there is a tendency for big
businesses to take regulation and government for granted.”
According to her, multinational
companies have, however, been operating with impunity by showing
disregard for extant regulations, stressing that government will not
condone such attitude going forward.
Clarifying the sanction on the South
African company, the minister said MTN had only been asked to refund the
amount it allegedly repatriated in violation of extant regulation.
This is why the recent decision by the
CBN to reverse its sanction on MTN Nigeria, imposing a refund of
$8.1billion the telecoms company had remitted abroad in violation of
foreign exchange remittances law of the country must have come with some
measure of relief to the government, MTN and international investors in
particular.
The Director, Corporate Communications,
CBN, Isaac Okorafor, said MTN Nigeria, led by its Nigerian shareholders
had held intensive engagements with the CBN in the course of which it
supplied additional material information, not previously offered to the
bank, satisfactorily clarifying its remittances – leading to the
amicable resolution.
“Having now reviewed the additional
documentation provided by the company, the CBN has concluded that MTN is
no longer required to reverse the historical dividend payments made to
MTN Nigeria shareholders,” he said adding however, that it identified
that the proceeds from the preference shares in MTN Nigeria’s private
placement remittances of 2008 were irregular having been based on CCIs
that were issued without the final approval of CBN.
There’s no gainsaying the fact that the
resolution of the logjam will be welcomed by the markets, especially MTN
shareholders who had long been put on their toes as a result.
Investors can also heave a sigh of relief following the uncertainty, which had pervaded the company’s stocks in recent times.
But, the CBN’s caveat that MTN
nevertheless breached extant regulations in the repatriation of funds
still casts a spell on its averred adherence to corporate governance and
could redefine public perception about the company
To the international investors, it again
showed that the Nigerian government could at least be trusted once
again as none of them had failed to repatriate their monies whenever
they needed it for as long as the contention lasted- true to the promise
of the CBN. It further boosts their confidence in the economy which
assures investors of unfettered entry and exit.
The assurance that the government will
not allow a repeat of the scenario should also strengthen investors’
belief in the economy
And to the CBN, it will be free from
both external and domestic attacks over the issue at least for now,
while the situation must have exposed regulatory lapses, which should be
adequately covered going forward.
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