Although resolved, the MTN certificate of capital importation (CCI) repatriation issue seems to have left a negative after effect on investors’ attractiveness for Nigerian firms.
BusinessDay survey revealed that the inability of some Nigerian firms to attract funds from investors is recent times can be linked to the souring of investors’ appetite for Nigeria as a result of the MTN fiasco.
Sharing his awful experience with BusinessDay, Ibraheem Babalola, MD of Muster, an AI powered peer-to-peer shared housing market place said there was an investment deal that the company was going to close in October 2018.
“It was an international deal involving a lot of money that would have enabled us to do so many things and make us grow very fast and the person that was leading the company that was going to invest in ours had done a lot of deals in the past,” Babalola narrated.
Explaining the reason why they lost the investment, Babalola said they had concluded on the investment discussions, as the investors had had sent them the term sheet.
“But the day before the agreed date that we were supposed to sign the deal, complete the transaction and close it, they reached out to us that one of their limited partners (LP) needed for our next round of investment was uncomfortable with Nigeria FX laws on repatriation and as such they wouldn’t be going forward with the deal,” Babalola said in a sad tone.
He said also that the incident happened at the time when the “whole MTN and CBN issue was happening and we lost that deal just because of that and that is the worst encounter for Muster.”
On whether or not the investment firm didn’t understand Nigeria’s policy well enough as that might have been the reason for not going through with the deal, the MD said they were not a first time investor as they “were one of the very early investors in Hotels.com, they sold a company to Thomas cook and did IPO for about four companies and has also helped in the sale of about five companies.”
MTN Group recently reached a$53 million settlement with the Central bank of Nigeria (CBN) to resolve a dispute over an alleged illegal transfer of $8.1 billion out of Nigeria.
“We know it requires material work to change the negative perspective some investors have of Nigeria but we are doing that and it is working, albeit slowly,” Yewande Sadiku, chief executive officer of the Nigerian Investment Promotion Commission (NIPC) said in a conference in Singapore.
A lost investment story of another company was narrated by a personal familiar with the start-up firm who spoke to BusinessDay on the condition of anonymity.
“I know of a company who after talks with an investment firm, and was close to finalising a deal, got a call that they cannot pull through with it.”
He however did not state the reason why but he said “this was just during the period MTN was put under pressure to pay the fine by CBN.”
The fine and resultant squeeze put on MTN by Nigerian authorities was condemned by many foreign investors.
“A short term gain like the MTN fine, leads to longer term pain, as who wants to invest in Nigeria after episodes like these?” Wayne McCurrie, a senior portfolio manager at South-Africa based Momentum Asset management said.
Responding to the new development, Rafiq Raji, the chief economist at Macroafricaintel shared a different view as he said seasoned Africa-focused investment professionals are not really moved by such MTN events considering such holdups are typical of emerging markets countries.
He added that the key determinant, as with all investment decisions, is whether the reward outweighs the risks.
Although he said the “only difference now is that more African countries are competing for these investments and are increasingly better at attracting them.”
Data already shows that Nigeria is losing out to its African peers as a destination for Foreign Direct Investment.
According to state statistics agency, the National Bureau of Statistics (NBS), FDI inflows to Nigeria fell to $981.7 million in 2017, less than a third of South Africa’s $3.2 billion FDI inflow and seven times less than the $7.4 billion flows mustered by Egypt, the continent’s top FDI destination that year.
Ghana, the second largest economy in West Africa that is the size of Lagos in population terms, attracted $3 billion, the chief of the Ghanaian Investment Promotion Commission said at the Africa Singapore Business Forum.
That gives Nigeria an FDI per head of $5.4 million, compared to Egypt’s $77.8 million and South Africa’s $58 million, given the three countries’ 180 million, 95 million and 55 million population respectively, underscoring the need for increased foreign investment in Nigeria, projected to be the world’s most populous nation after India and China by 2050.
Meanwhile, at the last MPC meeting, Godwin Emefiele, the CBN governor said “I will continue to say that CCI that are been issued to our foreign investors remains sacrosanct and no other company is being investigated on the issue of CCI,” he stressed that the MTN issue was an isolated one.
ENDURANCE OKAFOR
