CBN vs MTN: In conclusion

It was the night of Christmas Eve when the whole house was still and even the drop a pin could be heard. But the bigwigs at the Central Bank of Nigeria and mobile network operator MTN were concluding the long-drawn out matter of the latter’s remittances and they both released statements. It was at the peak of Christmas, so it would probably have been missed by a few people.

While the difference in the perspective of both organisations was remarkable, what was clear from both versions is that the matter had been resolved and MTN would no longer be required to reverse its historical dividend payments to its shareholders.

However, the CBN maintained that the proceeds from the preference share private placement were irregular because they were based on Certificates of Capital Importation in respect of which only an approval-in-principle, not final approval, had been given by the CBN. The resolution of this leg of the matter is that MTN will implement a “notional reversal” of that transaction, roughly in the amount of $52.6m.

CBN ends its statement assuring foreign investors that CCIs are “sacrosanct” and urging them to take advantage of the “enormous investment opportunities that abound within Nigeria”. The MTN statement however concludes with a reference to what this column and several others have serially identified as a significant flaw in the CBN’s case from the very start – the company relied on the dealers authorised by the CBN to ensure that required approvals were obtained prior to money being transferred. In other words, (i) the procurement and issuance of CCIs and (ii) the procurement of pre-remittance approvals are ultimately duties of the commercial banks involved.

Indeed, that a dispute of $8bn can be amicably resolved for $52.6m underscores how shaky the basis of the claim was. Furthermore, this notional reversal by MTN is being done on a “without admission of liability” basis. To the objective eye, not being a party to the negotiations, it lends weight to the widespread view that if there was indeed an infraction in the process of these remittances, it was at the very worst an administrative one and nowhere near worthy of the Agrarian hammer the CBN initially wielded. The CBN, along with many other regulators need to take a good long look at the hows, whys and possible consequences of the actions they’re taking.

To digress briefly, the actions of the Nigerian Civil Aviation Authority with its new e-Yellow Card are not dissimilar. It has begun an “enlightenment” campaign informing the general public that the current Yellow Cards will all expire on the 31st of March this year and setting out the steps for getting its new ultra-modern iteration. Of course, as you do, there’s no information about transferring the records in your current Yellow Card, if you are not yet due for a booster vaccination. All the information is geared towards payment and the untold harassment awaiting those who do not comply. There is no mention of the Federal Ministry of Health in all the publicity either.

Coming back to MTN, the company’s challenge to the Attorney-General’s tax demands remains ongoing. Though it is not right to comment in detail on matters under litigation but the question is yet to be answered on when the collection of federal taxes and demands for any underpayment fell to the office of the Attorney-General. I suppose one should not be too surprised, given this is the same Attorney-General that advised the Federal Government that force majeure means a contract was void from the outset.

Each regulator, each government functionary, is a piece in our regulatory jigsaw puzzle. And while the puzzle’s packaging is emblazoned with the purported investor-friendliness of Nigeria’s regulatory climate, the actual picture one gets when the pieces are put together is alarmingly different. These things also matter because regulatory actions here in Nigeria can and do have an impact on investors’ non-Nigerian operations. MTN’s stock lost at least 20% of its value on the back of a crisis which was not really one.

This is of course not to say that regulation cannot both be robust and investor-friendly at the same time. Those features are not mutually exclusive. However, one of the hallmarks of effective, world-class regulation has to be everyone knowing that when the regulator finally comes for you, it is because it has put an ironclad case together and the evidence is extremely compelling. To be otherwise would certainly affect the credibility of any such regulator.

There is also the final question of what happens to the fines that the CBN reportedly levied by direct balance deductions on the banks involved with MTN’s remittances. Will they now be non-notionally reversed, save for the amount attributable to the private placement remittances? I reckon the banks won’t push too hard on this.