Thursday, 8 November 2018

South Africa's Financial Stability Threatened by MTN's $10bn Nigeria Bill – Reserve Bank

MTN Group’s fights 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 has said.

"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 said in its Financial Stability Review released Wednesday in the capital, Pretoria.

The claims amount to almost all of MTN’s market value of about $12bn, it said.

A "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 said.

Nigeria’s central bank alleged in late August that MTN and four banks - Standard Chartered, Citigroup, Stanbic IBTC and Diamond Bank - illegally repatriated the money from Nigeria.

MTN sought an injunction in early September to buy itself time and fight the claim in its biggest market, which has wiped 18% off its market value within two weeks.

The Central Bank of Nigeria (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.

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