Standard Bank. Picture: FINANCIAL MAIL
Standard Bank. Picture: FINANCIAL MAIL

The Nigerian authorities have softened their stance towards Standard Bank with the removal of a potential multibillion-dollar liability on Stanbic IBTC, its subsidiary in the country.

Standard Bank, Africa’s largest lender, said on Tuesday the Central Bank of Nigeria would no longer be debiting accounts of the bank’s Nigerian subsidiary for $2.63bn as part of a "refund" the Central Bank of Nigeria had proposed, in relation to monies Standard Bank had remitted on behalf of MTN Nigeria.

In August, the central bank said it would be seeking to recover $8.1bn from MTN Nigeria and four banks that assisted the company in remitting dividends equivalent to the same amount to its home country, SA.

It said the repatriation of dividends from Nigeria between 2007 and 2015 was unlawful, and that it would be imposing fines on banks involved in effecting the payments on MTN’s behalf, namely Standard Bank’s Nigerian subsidiary, Citigroup, Standard Chartered and Diamond Bank.

Earlier in September, the Central Bank of Nigeria deducted a R75m fine from Stanbic’s account for the perceived foreign exchange contraventions. The central bank now says it is open to reviewing new representations made by Standard Bank and might review its earlier decision to impose the fine.

Standard Bank has consistently stated it has done nothing wrong. The news sent the shares of its Nigerian subsidiary nearly 5% higher on Tuesday, where it closed at 44 naira.

Head of equities at Sanlam Investment Management Patrice Rassou said "the Central Bank of Nigeria has taken the issue of recovering the MTN dividend from the bank off the table. It is positive because it would have been concerning if banks were made liable for funds which were not theirs in the first place.

"The fine levied wasn’t big, but recovering funds from the bank would have a disastrous effect on depositor confidence."

With Nigeria heading to the polls in February 2019, President Muhammadu Buhari is seeking re-election. According to Bloomberg, Central Bank of Nigeria governor Godwin Emefiele is a close ally of the president and might be acting to support him by targeting corporate wrongdoing.

The bank’s announcement was mainly to blame for MTN’s share price drop in recent weeks. Since January MTN has lost 39.9%. But it has begun to recover on news that the two parties might find an "equitable resolution". On Tuesday it closed 2.64% higher at R82.16.

"Given that the banks would have executed these transactions on behalf of MTN, it looks positive for MTN as well," says Brad Preston, head of listed investments at Mergence Investment Managers.

As recently as June, Standard Bank elected to increase its exposure to Nigeria by acquiring a further 11% in Stanbic IBTC Holdings, taking its ownership to 64%.