MTN’s Nigerian nightmare shows no sign of abating.

Not a week after being hit with a shock $8.1bn claim by Nigeria’s central bank, MTN shares dived a further 17% on Tuesday to close at their lowest in 12 years after Nigerian authorities accused the mobile operator of owing the country $2bn in back taxes.

CEO Rob Shuter said the “peculiar and coincidental timing” of what appears to be a regulatory assault on its business in the country was a “significant concern”, but that MTN would “vigorously defend” its position on both matters.

On an already horrific day for the market, MTN shares closed at R72, taking its market losses to R67bn since Thursday, when the mobile operator was accused of having “flagrantly violated foreign-exchange regulations” by repatriating dividends between 2007 and 2015.

MTN’s troubles in Nigeria highlight the risks in its business, with operations in difficult markets such as Syria and Afghanistan often shunned by multinational rivals.

In July, MTN was hit by US President Donald Trump’s sanctions on Iran, meaning it may be unable to repatriate R3.4bn from that country.

Nigeria is the company’s second-most important market after SA, contributing R7.42bn in earnings before interest, tax, depreciation and amortisation in the first half to end-June, after SA’s R7.45bn contribution.

Of MTN’s 223.4 million subscribers, 55.2 million are Nigerian. In the first half it was one of the company’s strongest growth regions.

Tax compliance

Through a probe into tax compliance on companies operating in Nigeria, the country’s auditor-general believes MTN should have paid $2bn in taxes relating to equipment imports and payments to foreign suppliers over the last 10 years.

MTN’s own assessment, which it completed on request by the auditor-general, indicated that it had paid $700m in tax on imports and payments over the period and that MTN Nigeria believed it had “fully settled all amounts owing”.

“I’m totally outraged,” said Vestact founder Paul Theron.

“You could expect this kind of behaviour from really third-string countries, but Nigeria is supposedly a country that takes itself seriously — it doesn’t seem to be consistent at all,” he said.

The fines, at Tuesday’s exchange rate of about R15.24 against the dollar, have now eclipsed MTN’s market cap of R135bn, while the stock market rout it has suffered means the market values MTN’s Nigerian business at close to zero.

First Avenue Investment analyst Nadim Mohamed said it was unlikely MTN shares would recover to their level of more than R100 before the central bank claim was lodged. “The confidence blow this has caused is permanent. I think you should wait for more information. MTN seems to be committed to Nigeria, but I don’t think you want to jump in without knowing where this is going,” he said.

According to a source, Nigeria’s tax authorities assumed, among others, that all foreign payments attract VAT, whereas some categories are VAT exempt. They also assumed an average of 15% on foreign imports, whereas, according to the source, rates can vary from 5%-20%, with taxes on base station equipment of 10%.

There are now mounting calls for diplomatic channels to intervene between MTN and the Nigerian government, and Shuter said the department of international relations & co-operation had requested a briefing from MTN on the dividend issue.

“We will certainly meet that request and anticipate Dirco [department of international relations & co-operation] will take the actions it deems necessary and appropriate,” added the MTN boss.