MTN has reached a settlement with the CBN

MTN Nigeria may have reached a settlement with the Central Bank of Nigeria pertaining to its alleged illegal repatriation of funds. The company disclosed this in a press release issued today. The CBN also posted a similar press release on its website.

Prior to this

CBN Governor, Godwin Emefiele disclosed this in a question and answer session held after November’s Monetary Policy Committee (MPC) meeting stated that the legal tussle between both parties was close to a settlement.

We are at the verge, I mean its at good as announcing it. At the appropriate time, these would be communicated.

How the settlement was arrived at 

The company disclosed that it provided additional documentation to prove it had satisfactorily clarified its remittances. The CBN upon review of the additional documentation concluded that MTN Nigeria was no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders.

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

Terms of settlement

• MTN Nigeria is to implement a notional reversal of the 2008 private placement of shares in MTN Nigeria at a net cost of circa N19.2 billion – equivalent to US$52.6m (the notional reversal amount).
• This is on the basis that certain certificates of capital importation (CCIs) utilized in the private placement were not properly issued.
• MTN Nigeria will pay the notional reversal amount without admission of liability.
• 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.
• MTN Nigeria will be engaging with the banks it obtained the CCIs from, in relation to the issues dealt with in the resolution agreement

Tussle with the AGF continues

The telecommunications giant, however, stated that its suit filed against the Attorney General of the Federation AGF) would continue.

Shareholders are advised 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.

The company also maintained its tax payments were up to date, and it had made no provisions for the back taxes the AGF alleged the company was owing.

MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment, as claimed by the AGF, is due, and consequently, no provisions or contingent liabilities are being raised in the accounts of MTN Nigeria for the AGF back taxes claim.

The AGF has accused the firm of failing to pay taxes amounting to $2.0 billion. The taxes span over a ten-year period and are related to the importation of foreign equipment into the country as well as payments to the suppliers of the said equipment.

Negative effects of the tussle

The legal battle between both parties shook investor confidence, as there was an outflow of foreign portfolio investments, with many fearing the sanctions could be applied to other companies.

The CBN was forced to issue a statement, maintaining there would be no retroactive application of foreign exchange laws.

We assure all investors that the integrity of the CCI regime remains sacrosanct and there shall be no retroactive application of foreign exchange rules and regulations.

The company’s share price at the Johannesburg Stock Exchange also took a hit. A planned Initial Public Offer for MTN Nigeria, earlier scheduled for this year, was put on hold.

How it all began 

The Central Bank of Nigeria (CBN) in August fined four banks a total of ₦5.86 billion for breaching Nigeria’s extant laws and forex rules when they facilitated illegal repatriation of funds to South Africa on behalf of MTN.

The CBN sanctioned the bank after evidence emerged about how they used irregular Certificates of Capital Importation (CCIs) to remit funds on behalf of MTN’s offshore investors.

The CBN then asked the banks and MTN Nigeria to immediately repatriate a total of $8.134 billion; being part of funds that were illegally taken out of Nigeria by the telco. MTN and the banks involved denied any form of wrongdoing.

In September, MTN took the Central Bank of Nigeria (CBN) and the office of the Attorney General of the Federation (AGF) to court.

The move according to the firm was in order to protect MTN Nigeria’s assets and shareholders’ rights within the confines of Nigerian law. The firm will, however, continue to dialogue with the relevant authorities.