The South African Reserve Bank (SARB) yesterday claimed that the financial dispute between the Nigerian authorities and telecommunications giant, MTN Group Limited, could potentially destabilise the country’s financial system.
This comes as Nigeria is mounting pressure on the South African telco to refund the sum of $8.1 billion which it had been accused of illegally remitting to South Africa from its Nigerian operation.
The Nigerian Government is also demanding that MTN pay the sum of $2 billion which it allegedly owes in back taxes.
In a Financial Stability Review published yesterday, the South African Reserve Bank specifically stated that the destabilisation could come in the form of MTN’s inability to meet its debt obligations.
The situation for MTN Group is even most unfortunate when bearing in mind that the total sum of $10 billion which Nigeria is demanding is almost equal to the company’s market value of $12 billion, said the Reserve Bank.
“Any potential impact on the South African financial system arising from this event will depend on the eventual resolution of the matters raised and MTN Group’s ability to continue meeting its debt obligations, including those in the South African banking sector. Given the globally interconnected nature of the South African financial system, this could increase systemic risk.” -SARB
Recall that the Central Bank of Nigeria, in late August, demanded that MTN Group Limited refund the sum of $8.1 billion which it was accused of illegally moving from Nigeria through the help of four banks, including CitiBank, Diamond Bank, Standard Chartered Bank and Stanbic IBTC Bank.
For their role in this alleged crime, the banks were also sanctioned by the Nigerian apex bank to the tune of ₦5.86 billion.
MTN and the affected banks all denied this claim, even as new evidence soon emerged that the telecoms company is owing Nigeria the sum of $2 billion in back taxes.
As expectedly, the controversies have affected MTN’s business. It has also cast doubt over the company’s planned Initial Public Offering in Nigeria.
In the meantime, MTN is negotiating with the Nigerian authorities on ways to resolve the dispute.