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MTN Hits Back at Repatriation Funds Claims

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It might be one of Africa's largest and most important communications markets, but Nigeria is proving to be a thorn in MTN's side.

The mobile operator is facing a demand from the Central Bank of Nigeria to "refund" US$8.1 billion that the operator has paid in repatriated dividends. The tussle that will ensue, and you'll see from the MTN statement below that there will be a battle over this, could well jeopardize MTN's plans for an IPO in Nigeria, where MTN has reported improving operational performance. (See Mixed Bag for MTN in H1 and Nigeria, Ghana Fuel MTN's Q1 Growth Ahead of IPOs.)

It has already impacted MTN's share price, which took a massive hit in after-hours trading Wednesday on the Johannesburg exchange, as the chart below shows:

Here is MTN's statement concerning the Bank's claim:

    MTN Nigeria Communications Limited (MTN Nigeria) received a letter on 29 August 2018 from Central Bank of Nigeria ("CBN:) alleging that Certificates of Capital Importation's ("CCI") issued in respect of the conversion of shareholders loans in MTN Nigeria to preference shares in 2007 had been improperly issued. As a consequence they claim that historic dividends repatriated by MTN Nigeria between 2007 and 2015 amounting to USD8.1 billion need to be refunded to the CBN.

    MTN Nigeria strongly refutes these allegations and claims. No dividends have been declared or paid by MTN Nigeria other than pursuant to CCI's issued by our bankers and with the approval of the CBN as required by law.

    The issues surrounding the CCI's have already been the subject of a thorough enquiry by the Senate of Nigeria. In September 2016 the Senate mandated the Committee on Banking, Insurance and other Financial Institutions to carry out a holistic investigation on compliance with the Foreign exchange (monitoring and miscellaneous) Act by MTN Nigeria & Others. In its report issued in November 2017, the findings evidenced that MTN Nigeria did not collude to contravene the foreign exchange laws and there were no negative recommendations made against MTN Nigeria.

    MTN Nigeria, as a law-abiding citizen of Nigeria, is committed to good governance and to abiding by the extant laws of the Federal Republic of Nigeria. The re-emergence of these issues is regrettable as it damages investor confidence and, by extension, inhibits the growth and development of the Nigerian economy.

    The company will engage with the relevant authorities and vigorously defend their position on this matter and provide further information when available. Shareholders are accordingly advised to exercise caution when dealing in the Company's securities until a further announcement is made.

— Ray Le Maistre, Editor-in-Chief, Light Reading for Connecting Africa.

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