The Central Bank of Nigeria has announced the resolution of its dispute with MTN Communications Limited, saying the company will now atone only for the illegal remittances on preference shares issued in 2008.
CBN’s spokesman and director of corporate communications announced the breakthrough in a statement published on the bank’s website on Monday.
The MTN also corroborated the truce in a statement simultaneously issued by MTN in Johannesburg.
According to the terms of settlement, the CBN instructed MTN Nigeria to implement a notional reversal of the 2008 private placement of shares in MTN Nigeria at a net cost of circa N19.2 billion – equivalent to US$52.6m (the notional reversal amount).
“This is on the basis that certain certificates of capital importation (CCIs) utilised in the private placement were not properly issued.
“MTN Nigeria and the CBN have agreed that they will resolve the matter on the basis that MTN Nigeria will pay the notional reversal amount without admission of liability”, MTN said.
“In terms of the resolution agreement, the CBN will regularise all the CCIs issued on the investment by shareholders of MTN Nigeria of circa $402,625,419 without regard to any historical disputes relating to those CCIs, thereby bringing to a final resolution all incidental disputes arising from this matter.
The CBN said four months ago that MTN should return to Nigerian coffers $8.1 billion repatriated between 2007 and 2015, because of capital importation certificate irregularities.
Four banks involved in the repatriation, Standard Bank, Stanbic IBTC Nigeria, Citibank Nigeria and Diamond Bank Plc, were fined by the CBN.
Standard Chartered Bank was fined N2.47 billion, Stanbic IBTC, N1.88 billion, Citibank Nigeria, N1.26 billion and Diamond bank, N250 million.
Here is the statement by CBN:
The Central Bank of Nigeria (CBN) in August 2018 directed MTN Communications Limited (MTNN) to reverse repatriations valued at $8.1 billion done on its behalf by four commercial banks between 2007 and 2015 on the basis of Certificates of Capital Importation (CCIs)
irregularly issued to MTNN.
Following the keen interest shown by various stakeholders sequel to the regulatory action, the CBN committed to engage further with MTNN with a view to achieving an equitable resolution.
Consequent upon the above, MTNN, led by its Nigerian shareholders, 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. Having now reviewed
the additional documentation provided by the company, the CBN has concluded that MTNN is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders.
However, the CBN identified that the proceeds from the preference shares in MTNN’s private placement remittances of 2008 were irregular having been based on CCIs that were issued without the final approval of CBN.
The CBN and MTNN have mutually agreed that the aforementioned transaction be reversed notionally to bring it into full compliance with foreign exchange laws and regulations.
The parties have resolved that execution of the terms of the agreement will lead to amicable disposal of the pending legal suit between the parties and final resolution of the matter.
The CBN assures foreign investors that the integrity of the CCIs issued by authorised dealers remain sacrosanct. Potential investors are encouraged to take advantage of the enormous investment opportunities that abound within Nigeria.
The telecommunications giant still has another issue to resolve: the court suit over the demand by the attorney general for back taxes.
MTN assured its shareholders that it is also moving towards resolution of this problem.
“Shareholders are advised that the legal process initiated by MTN Nigeria for injunctive relief restraining the AGF from taking further action in respect of its orders for back taxes is continuing.
“The AGF matter came up for initial mention before the Federal High Court of Nigeria Lagos Judicial Division on 8 November 2018 and has been adjourned to 7 February 2019. MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment, as claimed by the AGF, is due, and consequently no provisions or contingent liabilities are being raised in the accounts of MTN Nigeria for the AGF back taxes claim”, the company said.
The attorney-General of the Federation (AGF) is demanding from the company the payment of N242 billion and 1.3 billion dollars, for import duties and withholding tax.
* Pays $53 million to settle dispute
* Nigeria is MTN biggest, most lucrative market
* MTN says its tax affairs in Nigeria are up to date (Adds MTN statement, details)
South African telecoms operator MTN Group has agreed to make a $53 million payment to resolve a dispute in Nigeria, it said on Monday, ending a four-month multi-billion dollar dividend repatriation row that has hammered its share price.
Nigeria is MTN's biggest market, accounting for a third of the African telecoms heavyweight's annual core profit, but it has proven problematic for the company in recent years.
The Central Bank of Nigeria (CBN) had ordered MTN and its lenders to bring back a total of $8.1 billion it alleged the company had illegally repatriated using improperly issued paperwork between 2007 and 2008.
"The CBN upon review of the additional documentation concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders," MTN said in a statement.
However, the central bank has found that a 2008 private placement remittance worth around $1 billion was based on certificates that did not have final approval.
As such, MTN said it had been instructed by CBN to implement "a notional" reversal of that transaction by making a $52.6 million payment.
"MTN Nigeria and the CBN have agreed that they will resolve the matter on the basis that MTN Nigeria will pay the notional reversal amount without admission of liability," MTN said in a statement.
The CBN confirmed the outline of the agreement with MTN, without mentioning the $53 million payment. The agreement would lead to an "amicable disposal of the pending legal suit between the parties and final resolution of the matter," it said in a statement.
MTN and the CBN had filed a claim and counter-claim in a Nigerian court over the dispute. The legal case has been adjourned several times as lawyers said talks were under way on a settlement.
The settlement comes around two years after MTN agreed to pay a more than $1 billion fine for missing the deadline to cut off unregistered SIM cards.
Shares in MTN have fallen by around 20 percent since the end of August when the CBN asked the company to return the money.
The stock, which closed 2 percent higher on Monday, is also under pressure from a separate dispute with the attorney general of Nigeria (AGF), who has slapped the company with a $2 billion tax bill.
MTN has gone to court seeking to block the attorney general from taking further action regarding the order for back taxes. The matter was adjourned last month until next February.
"MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment, as claimed by the AGF, is due, and consequently no provisions or contingent liabilities are being raised in the accounts of MTN Nigeria for the AGF back taxes claim," the company said.
The disputes between MTN Nigeria and Nigerian authorities over $10 billion in repatriated funds and back taxes could increase risk in South Africa’s financial system depending on the outcome, the South African Reserve Bank (SARB) has said.
MTN Nigeria, a subsidiary of a South Africa-based telecommunication giant, MTN Group, is facing severe pressure from the Central Bank of Nigeria (CBN) to return $8.1 billion it repatriated from Nigeria through illegal means.
Also, the Office of the Attorney General of the Federation (AGF) also demanded a sum of $2 billion in tax arrears from the South African firm, bringing the total claim by the federal government to $10.1 billion.
“The immediate, or at least near-term, repatriation of the funds to the Nigerian authorities could affect MTN Group’s ability to continue meeting its debt obligations, including those in the South African banking sector, which, given the interconnected nature of the financial system, could increase systemic risk,” the South African apex bank said in its Financial Stability Review released Wednesday in the capital, Pretoria.
The claims amount to almost all of MTN’s market value of about $12 billion, SARB stated further.
A “potential worst-case scenario” would be for MTN to pull out of Nigeria, which would increase the company’s exposure level to reputational risk, the Reserve Bank said.
On August 29, the CBN directed MTN to refund $8.1 billion shareholders’ funds it allegedly repatriated from the country through illegal means, while it imposed a combined fine of N5.87 billion on four banks – Standard Chartered Plc, Citigroup Inc., Stanbic IBTC Plc and Diamond Bank Plc – that allegedly aided the process.
In early September, the teleco, which has Nigeria as its largest market, sought a court injunction restraining CBN from demanding that the amount should be refunded in order to buy itself time and fight the claim which wiped as much as 18 percent off its market value within two weeks.
”In order to protect MTN Nigeria’s assets and shareholder rights within the confines of the law, we have applied today in the Federal High Court of Nigeria for injunctive relief restraining the CBN and the AGF from taking further action in respect of their orders,” the telecom firm said in a statement.
In separate legal documents, the CBN asked the court to deny MTN’s request and said the telecommunication firm should pay 15 percent annualised interest on the sum until the court make a judgment and 10 percent from then until the whole amount is paid.
Last week Tuesday, a Federal High Court sitting in Lagos adjourned hearing in the case between MTN and the AGF over the alleged $2 billion unpaid tax bill till today, Thursday, November 8, while the court adjourned till December 4 to hear the case between the telco and CBN.
Source: The Punch
HSBC and UBS have closed their offices in Nigeria, the country’s central bank said in a report on Friday as it revealed foreign investment had fallen sharply from a year ago.
The bank said foreign direct investment in Nigeria fell to 379.84 billion naira ($1.2 billion) in the first half of the year from 532.63 billion naira ($1.7 billion) a year earlier.
It did not given reasons for the bank closures.
HSBC was not available to comment and UBS declined to comment.
The central bank said the outlook for the Nigerian economy in the second half was “optimistic” given higher oil prices and production but rising foreign debt and uncertainty surrounding the 2019 presidential election was a drawback.
Investor confidence in the West African country has been shaken since the central bank in August ordered MTN to bring back $8.1 billion to the country, part of profits which the South African telecoms firm sent abroad.
An HSBC research note dated July 18 said a second Buhari term “raises the risk of limited economic progress and further fiscal deterioration, prolonging the stagnation of his first term, particularly if there is no move towards completing reform of the exchange rate system or fiscal adjustments that diversify government revenues away from oil.”
The Nigerian Presidency has reacted furiously after British multinational banks report. In a statement, the Presidency accused the bank of thriving on "grand corruption" and helping past and present Nigerian leaders launder billions of naira.
The central bank also said three lenders failed to meet its minimum liquidity ratio of 30 percent, without naming them.
It added that non-performing loans (NPLs) have dropped to 12.4 percent as at June 2018 from 15 percent a year ago, still a long way above its 5 percent threshold.
“To further consolidate on the improvement, the Central Bank of Nigeria directed banks to intensify efforts at debt recovery, realisation of collateral for lost facilities and strengthening their risk management processes,” it said in the report.
In September, the regulator withdrew the license of Skye Bank for failing to recapitalise. It then transferred Skye’s assets to a “bridge bank” Polaris wholly-owned by the state-backed asset management company AMCON.
Nigerian banks have been trying to raise fresh capital after huge loan losses worsened by an economy that has just emerged from a recession. Diamond Bank last week denied it was in talks with investors to raise cash but said it was managing its capital, which borders on the regulatory minimum, to grow.
Another lender Unity Bank has been seeking to raise fresh funds to recapitalise.
Credit - Reuters