• Friday, March 29, 2024
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BusinessDay

UPDATE 2: MTN to implement notional reversal of 2008 private placement

MTN

In what is seen as a positive development for portfolio and foreign direct investments (FDI) into Nigeria, MTN Group has reached an agreement with the Central Bank of Nigeria (CBN) to resolve the dispute over an alleged illegal transfer of $8.1 billion out of Nigeria.

MTN Group said on its twitter handle that it made a N19.2 billion ($53m) payment, and is “engaging with banks regarding the agreement.”

The initial announcement from the CBN was for MTN to refund $8.1 billion.

“We are very comfortable with the fine and new agreement,” Pascal Dozie, Chairman of MTN Nigeria, told BusinessDay.

MTN stock was up 2 percent in Johannesburg trading. Its shares are down some 16 percent since news of the fine broke.

MTN Nigeria held various engagements with the CBN in order to find an equitable resolution to the matter.

In particular, a series of meetings were held in Lagos with CBN officials during November 2018.

At these meetings MTN Nigeria provided additional material documentation which satisfactorily clarified its remittances.

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.

However, the CBN maintained that the proceeds from the preference shares in MTN Nigeria’s private placement remittances of 2008 of about $ 1 billion were irregular having been based on CCIs that only had an approval in-principle, but not final regulatory approval of CBN.

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 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 agreed that they will resolve the matter on the basis that MTN Nigeria will pay the notional reversal amount without admission of liability.

“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,” MTN said in a statement.

MTN Nigeria relied on certain commercial banks to ensure all approvals had been obtained prior to the CCIs being issued and to ensure the CCIs were properly utilised in the private placement.

MTN Nigeria says it will be engaging with the banks in relation to the issues dealt with in the resolution agreement.

Omotola Abimbola, a research analyst at Ecobank, said it is a good thing that both parties were able to reach a reasonable agreement.

But he further explained that “perhaps the situation could have been better managed without having an impact on Nigeria’s investment attractiveness, because MTN is a global company and this issue went far and wide. So it has had an impact on investors’ perception towards Nigeria.”

Responding to the settlement reached, Bismarck Rewane, CEO of economics consulting firm Financial Derivatives Company (FDC) said it is a “very good development and will help repair part of the self-inflicted damage.”

“MTN is largely cleared but the banks made a mistake, so MTN will make a payment as those CCIs were improperly filed by the banks. We are satisfied with the settlement,” Godwin Emefiele the CBN Governor told BusinessDay.

BusinessDay learnt that the CBN does not typically review decisions it has made but decided to do so this time because it does not regulate MTN.

Emefiele had said in the last Monetary Policy Committee (MPC) meeting held in November that the issue with the mobile operator was almost finalised.

“We are in the process of saying ‘this matter has been resolved’. We have held meetings with the MTN group, they flew in from South Africa, and we are at the verge, when I mean verge, it is as good as announcing it,” Emefiele said.

Another source close to the CBN, had earlier told BusinessDay that even though the apex bank was looking at resolving the issue amicably, the decision by MTN to go to court was a ‘mistake.’

The Apex bank had in August 29, 2018 ordered MTN and its four banks to refund $8.134 billion back into the country, sending the company’s shares plummeting. The CBN had explained that the sanction was due to irregularities with respect to repatriations made by four banks on behalf of MTN Nigeria Limited.

MTN however advised shareholders 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.

 

ENDURANCE OKAFOR