Nigeria stuns MTN with R8.1 billion demand, shares plunge

 MTN Group shares plunged as much as 25% to a nine year low on Thursday, a day after Nigeria ordered the telecoms group’s Lagos-based business to hand over $8.1 billion that the authorities say was illegally sent abroad.

The demand by Nigeria’s central bank is the latest setback for MTN in Nigeria, the South African group’s most lucrative but increasingly also its most problematic market.

It comes two years after MTN, Africa’s biggest telecoms company, agreed to pay more than $1 billion to end a dispute in Nigeria over unregistered SIM cards.

The latest case underlines the risks of MTN’s strategy to operate in emerging markets, a move that has made it one of post-apartheid South Africa’s biggest commercial success stories, with operations in more than 20 countries.

Nigeria’s central bank said the funds had been illegally moved abroad because the company’s bankers had failed to verify TN had met all the foreign exchange regulations.

MTN denies the allegations.

MTN shares closed down 19.41% at R86.50, after touching R80.61, a level last seen in 2009.

The money is more than half of MTN’s market capitalisation, and analysts said the demand risked further undermining Nigeria’s efforts to shake off an image as a risky frontier market for international investors.

The crux of the allegation is that MTN used improperly issued certificates to convert shareholders loans in its Nigerian unit to preference shares in 2007.

As a result, dividends paid by MTN Nigeria to the parent company between 2007 and 2015  amounting to $8.1 billion are deemed illegal, and should be returned, Nigeria alleges.

“No dividends have been declared or paid by MTN Nigeria other than pursuant to certificates of capital importation issued by our bankers and with the approval of the CBN (Central Bank of Nigeria) as required by law,” MTN said in a statement.