EDITORIAL: Nigeria’s desperate strong-arm tactics
It appears that Nigerian domestic politicking could be behind the Nigerian raids on MTN and Standard Bank
Nigeria is spoken of as an economic equal to SA on the continent, at least measured by gross domestic product. But big-picture stats like GDP can be misleading. Nigeria has been battling ever since 2015, when the oil price crashed from more than $100 a barrel to below $40 a barrel, eventually settling at about $50 a barrel. Hard as it is to believe of a country with a population more than double SA’s, Nigeria is largely a single-commodity economy — relying on oil for more than 80% of its exports.
It is a country of contradictions too. Despite being blessed with immense economic potential, much of Nigeria’s creaking infrastructure dates back to colonial times and its economic hub, Lagos, is one vast, unending traffic jam. It can take six to seven hours to travel the few kilometres from the international airport to the city.
In 2016 Nigeria was the biggest exporter of oil in Africa and the 13th largest in the world. Absurdly, due to a lack of refinery capacity, it imports more than 90% of its daily requirement of 40Ml. Price caps have led to shortages and long queues at filling stations.
Much the same contradiction applies to rice, the staple food in Nigeria. The country, says the UN, is one of Africa’s largest producers of rice, but also one of the world’s largest rice importers.
Now, desperate for hard currency, Nigerian regulators have tried to fine SA telecoms giant MTN $10bn for supposedly transferring $8.1bn out of Nigeria "illegally" over several years, as well as owing $2bn in back taxes.
The dispute has caused MTN’s share price to slump by a third, to R72 — a level it was last at back in 2006. MTN’s investors are already scarred by a previous penalty levied in October 2015, when MTN agreed to hand over $1.2bn after originally being fined $5.2bn for not disconnecting 5.1-million unregistered SIM cards.
MTN admitted to its error in the 2015 case, but the feeling was that the penalty was heavily disproportionate to the offence — and linked to the oil price crash the same year.
This time MTN is adamant that it has done nothing wrong. CEO Rob Shuter has said that the Nigerian central bank appears to be fixated on dividends that MTN withdrew legitimately from the country.
Then the Nigerian unit of Standard Bank was fined R75m for issuing "irregular" certificates of capital importation to MTN Nigeria between 2007 and 2015. Last week, that amount was simply removed from Standard’s Nigerian account, even though Standard is appealing the fine.
This is no way for a country to do business. As Vestact’s Paul Theron has said: "This pathetic, nationalistic and immature attitude will severely weaken Nigeria’s economy in the years to come. MTN has been their most committed foreign investor in recent decades, by a mile. Thanks to these acts of wanton highway robbery, no large corporate will commit to building a serious business in Nigeria."
We have to ask what our diplomats are doing to protect our companies against this bullying.
It appears that Nigerian domestic politicking could be behind the Nigerian raids on MTN and Standard, generating a kind of business xenophobia against foreign companies.
Let’s hope not. Many of SA’s most prominent businesses, including Shoprite, MultiChoice and Mr Price, operate in the West African country. True, many SA companies have behaved arrogantly in the past. But to look for payback in this way risks dismantling one of the central attractions for investing on the continent: the prospect of a harmonious pan-African commercial pipeline. Nigeria’s strong-arm tactics are good for no-one.