MTN settles with Nigerian central bank on $8.1bn dispute

MTN Group [JSE:MTN] announced on Thursday that it had reached a settlement with the Central Bank of Nigeria (CBN) in terms of what the bank alleged was the improper repatriation by MTN Nigeria of US$8.1bn between 2007 and 2015.

Fin24 reported in August that MTN Group's shares plunged to a nine-year low after the NCB ordered it to return $8.1bn the bank alleged Africa's largest mobile-phone company illegally moved out of the country. MTN said at the time it "strongly refutes" the claim.

The order came about two years after MTN was first accused of repatriating dividends in contravention of Nigeria's foreign exchange laws. MTN was cleared in a report issued in November 2017 following a probe commissioned by Nigerian lawmakers.

MTN said in 2016 that its bankers had obtained central bank approvals before any dividends were issued.

Bloomberg reported previously that the SA Reserve Bank (SARB) said MTN Group's disputes with Nigerian authorities over $10bn in repatriated funds and back taxes could increase risk in SA's financial system depending on the outcome.

In a SENS statement on Thursday MTN Group said the agreement comes after MTN Nigeria had made various attempts to find an equitable resolution. This included a series of meetings held with CBN officials in Lagos in November 2018.

At these meetings MTN Nigeria provided the CBN with additional documentation to clarify its remittances. The CBN, upon review of the additional documentation, concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders.

However, the CBN maintains that the proceeds from the preference shares in MTN Nigeria's private placement remittances of 2008 - about USD$1bn - were irregular, since it did not have final regulatory approval of the CBN.

The CBN instructed MTN Nigeria to implement a notional reversal of the 2008 private placement of shares in MTN Nigeria at a net cost of about US$52.6m (about R765m). This was on the basis that certain certificates of capital importation (CCIs) utilised in the private placement were not properly issued.

MTN Nigeria and the CBN have now agreed that they will resolve the matter on the basis that MTN Nigeria will pay the notional reversal amount without admission of liability.

In terms of the resolution agreement, the CBN will in turn regularise all the CCIs issued on the investment by shareholders of MTN Nigeria without regard to any historical disputes relating to those CCIs.

According to MTN Group, this brings a final resolution to all disputes arising from the matter.

The MTN Group further stated on Thursday that MTN Nigeria relied on certain commercial banks to ensure all approvals had been obtained prior to the CCIs being issued and to ensure the CCIs were properly utilised in the private placement.

"MTN Nigeria will be engaging with the banks in relation to the issues dealt with in the resolution agreement," says the SENS statement.

The NCB announced in August that Nigerian regulator fined Citigroup, Standard Chartered, Stanbic IBTC and Diamond Bank a total of about $16m "for helping to move the money".

MTN Group further advised shareholders that the legal process initiated by MTN Nigeria for injunctive relief restraining the Attorney General of the Federal Republic of Nigeria (AGF) from taking further action in respect of its orders for back taxes, is continuing.

The AGF matter came up for initial mention before the Federal High Court of Nigeria Lagos Judicial Division on November 8, 2018 and has been adjourned to February 7, 2019.

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

"As a result of the above, shareholders are no longer required to exercise caution in dealing with the Company securities."

By late morning on Thursday MTN's share price was up 6.87% to R91.43 per share.

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