MTN settles billion-dollar dispute with Nigeria

02 January 2019 | Natalie Bannerman

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MTN has settled its $8.1 billion debt with Nigeria’s central bank for a nominal $53.2 million ending the long-standing dispute between the two entities.

Because of the debt MTN’s share price drop 22% back in August 2018 as the sum of money would will harm MTN’s “ability to continue meeting its debt obligations, including those in the South African banking sector,” said the South African Reserve Bank (Sarb).

The sum is only one of two demands from Nigeria. The aforementioned $8.1 billion owed to the Central Bank of Nigeria that MTN had taken out of the country with “irregular capital importation certificates issued over the period 2007 to 2015”.

The second came about when the office of Nigeria’s attorney general told MTN it “to recover $2 billion of taxes relating to the importation of foreign equipment and payments to foreign suppliers since 2008”.

“At these meetings, MTN Nigeria provided additional material documentation which satisfactorily clarified its remittances,” said MTN in a statement. Upon review of this documentation, the central bank “concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders”.

The settlement with the Central Bank of Nigeria amounts to less than 0.7% of the total amount owed and it great news for MTN’s CEO Rob Shuter who assumed the role in 2016, taking over from Phuthuma Nhleko.

“However, the central bank maintains that the proceeds from the preference shares in MTN Nigeria’s private placement remittances of 2008 of circa $1-billion were irregular, having been based on certificates of capital importation (CCIs) that only had an approval-in-principle, but not final regulatory approval of the central bank,” continued the MTN statement.

“The central bank instructed MTN Nigeria to implement a notional reversal of the 2008 private placement of shares in MTN Nigeria at a net cost of circa 19.2-billion naira — equivalent to $52.6-million. This is on the basis that certain CCIs utilised in the private placement were not properly issued.”

Both MTN and the Central Bank of Nigeria have agreed to resolve the matter with the operator paying the notional reversal amount without admitting liability.

“In terms of the resolution agreement, the central bank will regularise all the CCIs issued on the investment by shareholders of MTN Nigeria of circa $402.6-million without regard to any historical disputes relating to those CCIs, thereby bringing to a final resolution all incidental disputes arising from this matter.”

Additionally, MTN Nigeria as said to be “engaging with the banks in relation to the issues dealt with in the resolution agreement,” the group said. Adding “MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment is due.”