The shares of the MTN Group dropped as much as 23 per cent to a nine-year low, yesterday, a day after the Central Bank of Nigeria (CBN) ordered the telecoms firm to repatriate $8.1 billion alleged to have been sent abroad illegally.
The News Agency of Nigeria (NAN) reports that at trading on the Johannesburg Stock Exchange, MTN shares were down 21.4 per cent at 84.35 rand, after touching 83 rand, a level last seen in 2009.
The CBN's demand is the latest setback for MTN Nigeria, the South African group's most lucrative but increasingly also its most problematic market.
It comes two years after MTN, Africa's biggest telecoms company, agreed to pay a fine of more than $1 billion for allowing the use of millions of improperly unregistered SIM cards on its network.
But in a statement, MTN Nigeria refuted the CBN's claim in strong terms.
Signed by its public relations manager, Funso Aina, MTN said it received a letter on August 29 from the CBN alleging that the Certificate of Capital Importation (CCI) issued in respect of the conversion of shareholders' loans in MTN Nigeria to preference shares in 2007 had been improperly issued, and that consequently, the historic dividends repatriated by the telecommunications firm between 2007 and 2015 amounting to $8.1 billion needed to be refunded to the apex bank.
It claimed no dividends have been declared or paid by the Nigerian arm other than pursuant to CCIs issued by its bankers with the approval of the CBN as required by law.
He explained that the issue surrounding the CCIs has already been the subject of a thorough enquiry by the Senate of Nigeria.
According to him, "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 and 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."
Aina said MTN Nigeria, as a law-abiding body, is committed to good governance and to abiding by the extant laws of the Federal Republic of Nigeria.
Promising to "engage with the relevant authorities and vigorously defend our position on this matter and provide further information when available," MTN, however, added: "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."
This concern was re-echoed by Greg Davies of boutique investment house, Cratos Capital, in Johannesburg, who noted: "You just can't do business in an environment where these type of things are going to happen."
The CBN's director of corporate communications, Isaac Okorafor, said on Tuesday that investigations specifically revealed that $3.45 billion was allegedly repatriated by Standard Chartered Bank on the basis of illegally issued CCIs.
Similarly, "$2.63 billion, $1.76 billion and $348.9 million were repatriated by Stanbic IBTC Nigeria, Citibank Nigeria and Diamond Bank Plc between 2007 and 2015."
Okorafor said the investigations by the CBN in March 2018 became necessary, following allegations of remittances of foreign exchange with irregular CCIs issued on behalf of some offshore investors of MTN Nigeria.
Already, the CBN has ordered the managements of the four banks and MTN Nigeria to immediately refund the $8.1 billion allegedly repatriated by the company to the coffers of the apex bank.
Figures obtained from the CBN yesterday showed that the highest fine of N2.47 billion was slammed on Standard Chartered Bank, while Stanbic IBTC Nigeria got N1.88 billion. Citibank Nigeria is to pay N1.26 billion and Diamond Bank N250 million.
The CBN investigation further revealed that on account of the illegal conversion of MTN shareholders' loan to preference shares (interest free loan) worth $399.5million, the company illegally repatriated $8.13 billion.
Okorafor said the investigations were thorough and allowed all the parties a fair hearing. He advised banks and multinational companies in Nigeria to adhere strictly to extant regulations in their foreign exchange transactions.
Asked to react, Citibank's head of media, Lola Oyeka, said she could not speak on the matter.
She, however, noted that if the bank had a statement, it would be made available.
Standard Chartered Bank Nigeria, in a statement, said: "While we cannot provide additional information due to ongoing engagement with the regulators, we look forward to a rapid resolution and satisfactory outcome of this matter."
The heads of media of the remaining banks could not be reached for comments.
Meanwhile, the fine levied on the banks has pushed the stock market to a N100 billion plunge.
At the close of transactions, yesterday, the banking sector of the Nigerian Stock Exchange (NSE) witnessed free fall in share prices, as 10 banking stocks, including those of Diamond and Stanbic IBTC recorded price depreciation, reversing the gradual recovery recorded in the sector at the re-opening of trading on Monday.
Operators told The Guardian the development was having a multiplier effect on the market, which is largely driven by activities in the banking sector.
Findings also revealed that a lot of investors who gave mandate for the purchase of banking stocks suddenly issued counter-directives, following the pronouncement, apparently fearing they may lose their investment.
The all-share index depreciated by 272.27 absolute points, representing a decline of 0.77 per cent.
It closed at 35,086.67 points from 35, 358.94 recorded on Wednesday.
The market capitalisation went down by N100 billion from N12,909 trillion, closing at N12,809 trillion.
Diamond Bank, which appreciated by N0.09 kobo, to close at N1.39 kobo on Wednesday, lost N0.13 kobo to close at N1.26 kobo yesterday due to investors' apathy to the stock.
Stanbic IBTC lost N1.25 kobo to close at N47.25 kobo, from N48.50 kobo at which it opened for transactions yesterday.
The Managing Director of Highcap Securities, Imafidon Adonri, said: "The banking index declined yesterday.
Previously, we saw some recoveries in the sector. But today (Thursday), the information has eroded investors' confidence in the sector."
He admitted it was appropriate to sanction banks that contravene CBN rules on transactions but expressed fear that the huge fine might impact negatively on the banks' balance sheet.
"My fear is that the sanction appears to be severe. The punishment is capable of destroying the banks.
If there is a way the CBN can reduce the sanction, it will be welcomed.
"It is the people that committed the offence, not the bank. The severity of the sanction is not in order.
If anything happens to the banking sector, it sends a lot of panic to the market."