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Nigeria turning page in ties with private sector, investors say

…after AGF drops tax dispute with MTN …stakeholders applaud move to uphold rule of law

There is a rare praise from Nigeria’s private sector after what appears to be a cooling off in the face-off between the government and the Nigerian unit of telecommunication giant, MTN, over a controversial $ 2 billion tax claim levied by the attorney general and justice minister.

“It appears to me that I am walking back into a Nigeria I did not expect,” one foreign private sector operator just returning from vacation told BusinessDay on Friday.

This followed reports that telecoms giant MTN Nigeria has withdrawn its case against the attorney general and minister of justice after the latter sent a letter referring the government’s $2 billion tax claim to the appropriate tax authorities, the Federal Inland Revenue Services (FIRS) as the Nigeria Customs Service.

The letter from the justice minister was received by MTN lawyers who are believed to have advised that the case which MTN brought challenging the tax claim be withdrawn, given the good faith shown by government.

Telecommunications industry stakeholders say that this decision should have been made a long time ago.

Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), told BusinessDay in a telephone interview that the bodies established by government to look into taxes and exports should be independent and allowed to do their work without interference.

“Although we are happy that it would appear that the AGF has not found anything materially different from what FIRS and Customs already know about MTN, what we can only pray for is that going forward, cases that involve these types of situation or accusations of such a large organisation – a multinational corporate that is operating not only in Nigeria but in other countries – should be thoroughly viewed and investigated by the appropriate government agency before going to public and stating confidently that they had found an issue, when now there may not be any issue,” Teniola said.

BusinessDay understands that directors of MTN Nigeria held a special board meeting Friday morning at which it was agreed that the case be taken out of court while the company prepares for engagement with the FIRS and the Customs Service on the matter.

MTN Nigeria’s share price has rallied two straight days and closed at N116 on Friday, the highest this year.

“The development is welcome and indicates that a big overhang issue around investing in Nigeria has been lifted,” said Tajudeen Ibrahim, head of investment research at Lagos-based Chapel Hill Denham. “It is also consistent with our view that the AGF is not the party legally responsible for collecting taxes and duties in Nigeria.”
Several business leaders interviewed by BusinessDay spoke of a number of positive developments which have been roundly welcomed by the private sector.

These include the ability of the government to have the 2020 federal budget ready for implementation before the end of last year, the emergence of a progressive tax regime, the push by the electricity regulator NERC to enthrone a market-determined tariff, and the resolve of President Buhari to push back the shock sack of two CEOs of parastatals which was ordered by the minister of power in December.

“All these moves are positive for the economy and I think it is part of a good trend,” Bismarck Rewane, leading economist and member of the newly-established presidential Economic Advisory Council, told BusinessDay.
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), also welcomed the new development regarding MTN and the AGF.

“It is a return to the path that should normally have been followed. The manner in which the AGF came into the picture of the tax saga aroused significant suspicion and had a negative signalling effect,” Yusuf told BusinessDay.
“To deepen the confidence of investors, we need to fix fundamental and systemic issues. We need structural and institutional reforms. We also need to address monetary, trade policy and fiscal policy issues. These are the things that would endure,” Yusuf said in a comment on Friday.

It can be recalled that the development of this case and allegations of illegal repatriation of funds by the telecoms company hurt MTN’s shareholder value in Johannesburg and delayed the company’s plans to list on the Nigerian Stock Exchange (NSE).

“We have to understand that the reputation of this company has been tarnished by that single act and there is an impact on MTN’s brand and its ability to convince its shareholders that there was nothing like that,” Teniola said.

He said the Nigerian government needs to make a statement that provides an assurance to investors who have any doubts about this issue that this type of thing will not occur again.

Timothy Olawale, director-general, Nigeria Employers’ Consultative Association, an umbrella organisation of private sector employers, also commended the government for opting for dialogue and avoiding a long-drawn legal process that was not in the interest of both parties.

“We affirm that with the rate of unemployment in the country, government and its agencies will do well to continuously take steps that will increase the confidence of local and international investors,” Olawale told BusinessDay.

“The MTN situation has been a test case. We hope this will herald a positive change in government agencies’ disposition to the private sector. We presently still have some regulatory agencies stifling businesses by jettisoning dialogue and forcing businesses to take the legal option, which is not good for job creation and investment promotion,” he said.

The controversial land border closure which is hurting legitimate exporters and a N50 stamp duty on Point of Sales (POS) transactions that threatens to roll back gains of building a cashless economy and financial inclusion are some policies investors hope the government will also review in due time to further cement a change of approach to private sector.

Gbenga Adebayo, president and chairman, Association of Licensed Telecommunications Operators in Nigeria (ALTON), told BusinessDay that it is only fair that the rule of law is followed under all and every circumstance.

“Revenue collection, excise and levies collection are the responsibility of statutory revenue collection agencies. So long as the FIRS and NCS are allowed to do their work as provided for by law, and rule of law is allowed to prevail, that would be fair to all. Where we have a problem is where we have an agency that has no direct responsibility of certain services attempting to execute such service,” he said.

Last year, Abubakar Malami, Nigeria’s attorney-general, had asked MTN to pay $2 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers since 2008.

MTN denied the tax liabilities and proceeded to sue the Nigerian government over what it said were false claims and challenged the legality of the AGF in a matter relating to taxes.

A senior MTN Nigeria plc official told BusinessDay that the withdrawal of the court case was a logical follow-up to the action of the justice minister.

“By this action taken by the minister, the case seemed to have fallen off anyway. We are grateful for this and we know that this might not be end of the matter but we now look forward to dealing with the appropriate tax authorities,” the official said.

The tax claims brought by the government had set alarm bells ringing among investors, and it is believed to have damaged investor confidence in Nigeria.



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