Nigeria in an official MTN 419 scam

2015-10-29 06:01

Still without a finance minister, with most portfolios managed by former military dictator and now democratically elected president Mohammadu Buhari, Nigeria has decided that its economic woes must be paid for by South Africa's best brand, mobile operator MTN.

With over 60 million mobile subscribers under it, MTN has brought innovation and needed communications mobility to Nigeria investing billions of dollars there. MTN is also one of the most stable employers in Nigeria and is key in Nigeria's overtake of South Africa as a major African economy. In its GDP rebasing, technology played a key role along the media industry.

Nigeria is largely a slum dweller country with near impossible data on who resides where as slums are. Like most countries, Nigeria is obliged in terms of international agreements to register its mobile phones issues in the past. In South Africa we had a period to register these and there is reported 98% coverage on live registered SIM cards. The importance of registering SIM cards is very important especially in a country like Nigeria with heightened terrorism. Most homemade terrorists bombs use cellular technology to detonate projectiles.

MTN has about 5 million of the 60 million customers yet to comply with the orders to register their SIM cards, many of these have tried to register but have inadequate data to register due to the nature of Nigeria including the huge backlog by Nigeria to issue identity cards to its citizens and a largely unbanked citizenry. Those who have visited the country will know that it operates via cash with only business people using credit accounts. Utility bills are hard to come by as the country powers itself mostly from personal generators.

The $5.5 billion (R75 billion or 1.09 trillion niara) fine for failure to register these users with bonafide reasons means MTN must henceforth cut off many people's livelihoods. The overzealousness of the fine, amounting to at least 20% of MTNs market valuation on the JSE signals a potential desperate government willing to endanger its reputation to scam needed cash out of a foreign investor. This is 419 scam gone public.

To understand the magnitude of the penalty we must look at the country's 2015 federal budget $23 billion dollars and compare it to the fine of $5.5 billion dollars. Outrageous.

Nigeria has pegged one US dollar at 161 Nigerian niara. In its medium term budget $3.5 billion is earmarked for the entire countries infrastructure spend.

The country is heavily depended on oil revenues for up to 85% of its foreign exchange and government revenues as its tax base is low due to the informal nature of its structure. This is a country of street vendors in the main.

The South African government must object in strongest terms and issue a warning to its business community of the new risks over Nigeria investments.

Even companies found to have stolen Nigerian oil and mineral wealth or heavily polluted its green lands have not seen such overcharged penalties.

Nigeria is quickly following dictatorial style of governance in its economy as it suffers for foreign exchange constrained by low oil prices. The woes of placing all eggs in one basket are biting hard and the penalty against MTN is not going to assist Nigeria.

Bongani Mbindwane @mbindwane

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