MTN Group’s dispute with Nigerian authorities over $10bn in repatriated funds and back taxes could increase risk in South Africa’s financial system depending on the outcome, the South African Reserve Bank said.
The bank, in its Financial Stability Review released on Wednesday in Pretoria, said if MTN eventually repatriates the disputed amount to Nigerian authorities, the telecom’s ability to meet its debt obligations, especially in South Africa might be affected, Bloomberg reported.
“The immediate, or at least near-term, repatriation of the funds to the Nigerian authorities could affect MTN Group’s ability to continue meeting its debt obligations, including those in the South African banking sector, which, given the interconnected nature of the financial system, could increase systemic risk,” the South African Reserve Bank added.
“The claims amount to almost all of MTN’s market value of about $12bn,” it said.
The potential worst-case scenario would be for MTN to pull out of Nigeria, which would increase the company’s exposure level to reputational risk, the Reserve Bank added.
The Central Bank of Nigeria in late August had alleged that MTN and four of its banks – Standard Chartered Plc, Citigroup Inc., Stanbic IBTC Plc and Diamond Bank Plc – illegally repatriated $8.1bn from Nigeria, while the office of the attorney general claimed the company failed to remit $2bn back taxes.
In order to protect its assets and interests of its shareholders, MTN Nigeria had applied to the Federal High Court of Nigeria for an order restraining the Central Bank of Nigeria and the Attorney General of the Federation from taking further actions against it.
However, the CBN in October filed a countersuit, pleading that the court should not grant an injunction that would stop MTN Group from transferring the disputed $10bn back to Nigeria.
It also asked the mobile network operator to pay 15 per cent annualised interest on the sum until the courts made a judgment, and 10 per cent from then until the whole amount was paid.
MTN, while maintaining its innocence of all the allegations levelled against it, pledged to continue to engage with the regulatory authorities to clarify the issues of repatriation of dividends worth $8.1bn and unpaid taxes of $2bn.
The CBN Governor, Godwin Emefiele, while commenting on the disagreement recently, said the bank had received documents from MTN and the four lenders involved in the case and was in communication with all parties involved.
He added that there could be a possible reduction in the amount it had ordered MTN Nigeria to repatriate.
“The Central Bank of Nigeria will be examining these, then it will be escalated up to my level,” he said, adding that he expected to get the results in a couple of weeks.
The hearing of applications in the case filed by MTN Nigeria Limited against the CBN was adjourned to December 4, 2018, before Justice Saliu Saidu at the Lagos Federal High Court in Ikoyi.