Nigeria Sees `Happy' Resolution to $8.1 Billion MTN Dispute

(Bloomberg) -- After coming out all guns blazing, Nigeria’s central bank surrendered some ground in its tussle with MTN Group Ltd., pledging that a dispute over the repatriation of $8.1 billion in dividends from the country will soon be resolved.

Examiners from the central bank are reviewing documents provided by Johannesburg-based MTN and four banks accused of moving money out of the continent’s biggest oil producer without the regulator’s final authorization, Governor Godwin Emefiele told reporters on Tuesday in the capital, Abuja. He also clarified that the regulator had initially wanted MTN to reverse the flows and that there was no liability on behalf of the lenders.

“We’ll resolve the matter,” Emefiele said. “Everyone will be happy” from MTN and the lenders to the Central Bank of Nigeria and the government, he added.

Nigerian authorities are changing their tone after coming under criticism that the impasse with MTN and lenders including Citigroup Inc., Standard Chartered Plc, Standard Bank Group Ltd. and Lagos-based Diamond Bank Plc threatened to spook investors. The regulator had initially demanded MTN and the banks refund the money, spurring the biggest collapse in MTN’s stock in 20 years.

‘Erratic Nature’

“The erratic nature of the CBN -- and perhaps even the manner in which its position has been articulated in the MTN saga -- will at the minimum highlight concerns regarding the business environment in Nigeria,” said Ryan Cummings, a director at Signal Risk, which advises companies in Africa. “And, at worst, illustrate that the country is a jurisdiction where state involvement could occur with detrimental consequences should there be political capital to derive from it.”

MTN’s shares rose 2.6 percent by the close in Johannesburg, gaining for a fifth straight day after the company last week announced it provided extra information that may lead to an “equitable resolution.” That pared losses to 23 percent since Aug. 29, the day before the central bank demanded the company return the money.

“The CBN now is trying to be as diplomatic as possible while at the same time they just shot themselves in the leg,” said Abiodun Keripe, head of research and strategy at Elixir Investment Partners in Lagos. “They said these guys have erred and all of a sudden you are now talking about making them happy. All of these will form a precedent going forward, how they manage it is critical. It would be good if there is a soft landing just for the health of the economy and the capital market.”

Positive Step

Earlier on Tuesday, Johannesburg-based Standard Bank said the central bank won’t take at least $2.63 billion from the accounts of its local unit and that the central bank may review an earlier penalty.

Standard Bank’s Stanbic IBTC, Standard Chartered, Citigroup and Diamond Bank were fined about $16 million between them for repatriating the dividends. The central bank had already taken the fines by debiting the accounts of Stanbic IBTC and Diamond Bank. Emefiele said the regulator had originally sought documents detailing the transactions in May and extended this by another two months before making the announcement.

Representatives in Lagos for MTN and Citigroup declined to comment, while a spokeswoman for Diamond Bank said she was unable to provide a response. A spokesman for Standard Chartered didn’t answer a phone call or immediately respond to a text message.

Back Taxes

The accusations against MTN -- including allegations by the attorney general’s office that it owes $2 billion of back taxes -- come as President Muhammadu Buhari’s administration faces criticism of its economic management in the run-up to the elections.

Two years ago, MTN negotiated a $5.2 billion fine down to about $1 billion plus a commitment to list its local business in Lagos. That penalty was related to subscribers that weren’t properly registered in the country.

“It’s a shoot-first-and-think-later scenario,” Kayode Omosebi, an analyst at Lagos-based Asset & Resource Management Co., said on the central bank’s handling of the MTN matter. The CBN should “take their time and do some analysis before coming out to the market,” but at least investors now “know that things may not be as bad as the CBN put it initially.”

To contact the reporters on this story: Yinka Ibukun in Lagos at yibukun@bloomberg.net;Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net;Tope Alake in Lagos at talake@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, John Viljoen

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