Shares of Nigeria unit of Telco giant MTN Monday jumped by the most allowable in a day following the withdrawal of a $2bn tax claim by Nigeria’s Attorney General.
MTN Nigeria gained 10 percent to N127.60 per share, the highest price in nearly 11 weeks. Monday’s was also the most share price movement since a 10 percent gain in May 2019, when MTN made its NSE debut.
“The news came as a positive surprise to investors. One of the biggest downside risks for foreign investors had been that dispute with the AGF,” said Yinka Ademuwagun, an analyst at Lagos-based United Capital. “Moreso, the stock had declined in the last few weeks presenting a good entry point.”
The Attorney-General of the Federal Republic of Nigeria and Minister of Justice (AGF) had on Friday, January 10, withdrawn a claim for back taxes of approximately $2bn and referred the matter to the Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS).
The tax dispute dates back to August 2018, when the AGF made a demand for MTN Nigeria to pay almost $2bn in taxes relating to the importation of foreign equipment and payments to foreign suppliers since 2008.
MTN denied any wrongdoings, and late last year filed a lawsuit challenging the legality of the AGF in the matter.
The High Court hearing for the case was adjourned to January 30 and 31 2020.
However, MTN Nigeria has said it would consequently follow due court process to withdraw its legal action against the AGF and engage with FIRS and NCS on this issue.
“We appreciate this decision of the Attorney General which paves the way to an orderly and amicable resolution of this matter,” said Rob Shuter, MTN Group CEO. “MTN remains fully committed to meeting our fiscal responsibilities and contributing to the social and economic development of Nigeria and all regions where we operate.”
The turn of events came as a pleasant surprise to investors who had been worried that the $2bn tax dispute could affect MTN Nigeria’s dividend pay-out, as well as the company’s valuation.
MTNN led the gainers’ chart Monday as the market advanced by 0.74 percent extending a record bull run to 11 trading days. Year’s return for the market is now 10.40 percent.
MTN Nigeria, the biggest mobile phone network in the country, grew its profit by almost 29 percent to N148bn in nine months ended September 30 2019.
Revenue of the Telco grew by 12 percent in the period to N856bn as subscribers rose almost 10 percent to 61.6 million on an annual basis.
So far in 2020, MTNN share price has surged almost 22 percent.