NCC-MTN fine: Lessons from the CBN

The Central Bank of Nigeria (CBN) in 2015 fined four banks for various incidents of breach. Zenith Bank, Sterling Bank, United Bank for Africa and Guaranty Trust Bank were fined a total of N3.2bn for various offences.

The fines, which apparently became public knowledge following the recent issuance of annual reports by the affected banks, draws interesting parallels with a recent (similar) incident of regulatory sanction in the telecommunications sector. In October 2015, the Nigerian Communications Commission (NCC) fined MTN a total of N1.04trn (later reduced to N780bn) for offences relating to its failure to deactivate 5.2m incomplete SIM registrations from its network. 

Public opinion on the MTN-NCC imbroglio has been largely divided along two lines. On the one hand there’s the sentiment that the fine should be paid willy-nilly as MTN was well aware of its regulatory obligation concerning SIM registration and in any case has the requisite financial muscle to pay the fine. On the other hand, there’s the relatively muted refrain of commentators calling for reflection on the issue vis-à-vis the unprecedented quantum of the fine.

While perhaps both strains of opinion have their merits, the following learnings from the banking fines are quite instructive:

(1) Three of the four banks involved arguably rank amongst Nigeria’s top 10 banks (with a cumulative 2014 profit after tax figure in excess of N246m), yet they were “only” fined a total of N3.2bn (with the largest individual fine being UBA’s N2.969bn). When compared with the N1.04tr/N780bn fine imposed on MTN (with a 2014 profit after tax figure of N209.02m), quite clearly, the MTN fine has grave implications (intended or otherwise) on the practical realities of the business.

(2) The relative lack of “media circus” around the incident as though the offences were committed at various times in 2015, the issue has only recently become public knowledge as a result of disclosures in audited financial statements of the affected banks. The management of the incident by the CBN and the affected banks facilitated prompt closure and did not therefore  degenerate  in such a manner as to pose a threat to investor confidence and stability in the banking sector.

(3) Notwithstanding the gravity of the offences (e.g., failure to meet the TSA reporting and remittance deadline, failure to update customers’ records and conducting continuous due diligence on some accounts, processing import transaction for a customer, pending the receipt of the customer’s renewed NAFDAC certificate and incomplete account opening form), the relevant regulations were such that the applicable fines were not inconsistent with financial realities.

Given the role of the telecommunications sector as a key driver of GDP in Nigeria (more so considering the slowdown in the erstwhile mainstays of manufacturing and oil & gas) coupled with the critical role of MTN in that sector, it is imperative that the issue of the fine be handled with more diplomacy than doggedness.

Without prejudice to the arguments on either side of the divide with regard to the MTN-NCC imbroglio, both parties should take learnings from the banking sector incident in resolving their current dispute and, more importantly, going forward by identifying and remedying other potential regulatory landmines.

Eniola Abidoye