Reserve Bank warns that MTN’s feud with Nigeria may put SA financial system at risk

MTN’s battles with Nigerian authorities over $10bn in repatriated funds and back taxes could increase risk in SA’s financial system, the Reserve Bank said.

Africa’s largest wireless carrier by subscribers is facing mounting pressure to return $8.1bn to Nigeria after its central bank argued that the Johannesburg-based company had repatriated funds illegally. Separately, the West African nation’s attorney-general’s office alleges the company owes $2bn in back taxes.

The “near-term repatriation of the funds to the Nigerian authorities could affect MTN’s ability to continue meeting its debt obligations, including those in the South African banking sector”, the South African Reserve Bank said in its Financial Stability Review released on Wednesday. “Given the interconnected nature of the financial system, that could increase systemic risk.”

The claims amount to almost all of MTN’s market value of about $12bn, the Reserve Bank said. That could also lead to a “worst-case scenario” of MTN pulling out of Nigeria, which would increase the company’s exposure level to reputational risk, it 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 to fight the claim in its biggest market, which has wiped 18% off its market value within two weeks.

The shares traded 0.6% higher at R89.50 at the market close on Wednesday, valuing the company at R169bn.

Bloomberg