The Nigerian Federation vs MTN
Does the federal government want to chase foreign investors away from Nigeria? This is one of most frequently asked questions since the Central Bank of Nigeria (CBN) asked MTN to refund the $8.1 billion it repatriated as profits out of Nigeria from 2007 to 2015 based on “irregular certificates of capital importation”. CBN also fined four banks N5.8 billion over the certificates. We had barely finished reading the story when Mallam Abubakar Malami, the attorney-general of the federation and minister of justice, fired another letter to MTN demanding “back taxes” of $1.28 billion and N242 billion, both of which we can safely round up to $2 billion. You again, MTN? Only you?!
Coming three years after Nigeria’s biggest telephone operator was fined N1.04 trillion by the Nigerian Communications Commission (NCC) for failing to disconnect 5.2 million unregistered subscribers, the latest sledge hammer blows $8.1 billion from the CBN to pay dividends to could kill any company — except it is in the its shareholders abroad. Now, this is where the Apple-Amazon-Shell category. The series of trouble is. The CBN said it has just investigated fines and sanctions against MTN would play and found out, in 2018, that MTN’s CCIs were into the hands of those who think the Nigerian “irregular”. That is, MTN’s bankers did not get a state has an agenda against the telco. I have “final final” approval before re-issuing the CCIs. even heard whispers of “xenophobia” following Therefore, the conversion of loan to preference similar negative attitude towards Multichoice shares was null and void. CBN is now saying: Nigeria Ltd, a Nigerian cable TV company owned “You cheeky rascals, you played a fast one on mainly by Multichoice Africa of South Africa. us! Return the $8.1 billion I gave you to pay
While many Nigerians can understand the dividends over eight years and I will return issue of “unpaid taxes” as raised by Malami, your naira to you at the rates you bought the the matter of “irregular” certificates of capital forex! Thank you.” This is the sense I made importation (CCIs) is a little bit technical. This is out of the press statement issued by the CBN the sense I can make out of it if I were to explain a little over a week ago. to the uninitiated. Between 2001, when it got a But MTN is seriously disputing CBN’s claims mobile phone licence to operate in the country, and suggesting that the investigation was shoddy. and 2006, MTN brought in $402 million to start According to the company, even though the business here: $59.4 million as shareholders’ $399 million loan was converted to preference funds and $343.1 million as loan. For bringing shares and CCIs were re-issued, none of the money into Nigeria to invest, you get a CCI as dividends repatriated between 2007 and 2015 was confirmation. It will, at the same time, allow you for the preference shares. Or, to say it another to get forex from CBN if you want to take the way, preference shareholders have not received money out or collect dividends as an investor. any dividends based on the new CCIs. MTN That’s the job of CCI. is also maintaining that, in fact, the loan was
The CBN said that in 2007, MTN Nigeria a tenor-free and interest-free loan. No interests decided to convert $2.9 million of the $402 million have ever been paid on it. MTN is saying: “Hey to equity and the remaining $399.1 million to guys, do your homework well! We’ve never shares, or what they call “preference” shares. paid any dividend on those preference shares!” A preference share, as the name suggests, gives On the $2 billion tax bill from the AGF, MTN preference to the owner when the goodies is also disputing the figures. MTN has been are shared. The investor usually gets a fixed contesting some figures with the Federal Inland sum as dividend. Conversely, the “ordinary” Revenue Service (FIRS) and Nigeria Customs shareholders feed on the leftovers. While ordinary Service (NCS). FIRS is demanding N84 billion, a shareholders may not get dividend at times, matter that is now before the tax tribunal (although preference shareholders will always get a fixed MTN has paid while contesting it). Customs is sum. MTN applied for, and got CBN’s provisional also demanding N52 billion which it says was approval, to convert the $399 million loan to not “properly captured” in its computations; that preference shares. So it was no longer a loan. one too is still a subject of negotiations. NCC, on
There were conditions given by the CBN to its part, is not asking for anything from MTN. MTN for the bankers to be able to convert the Adding N84 billion to N52 billion, in the worst loan to “redeemable” preference shares for the case, will not end up at $2 billion. AGF’s demand re-issuance of the CCIs. One, MTN must sign is, therefore, being hotly disputed by MTN. an undertaking that no repatriation would be I will now make my comments. I am not made either on the principal or interest of the among those saying foreign investors will be original loan from 2001 till the conversion to discouraged by regulatory actions. Actually, preference shares was done. Two, the conversion genuine investors care about the regulatory must receive the final approval of the CBN. environment. They want to be sure that the There were other conditions — such as listing rules are clear and are meant to be obeyed. the preference shareholders and the number If they have fallen foul of the rules, then they of shares issued to each one of them; reflecting know they will pay the penalty, which must same in the documentation at Corporate Affairs have been pre-defined. Big corporations such Commission (CAC); and other basic housekeeping as Shell, Google and Apple have faced heavy chores. sanctions in foreign countries and they did not
Where were we? Between 2007 and 2015 — a run away because of that. If Nigerian regulatory period of eight years — MTN bought forex worth authorities are trying to enforce the rules, we
THISDAY Newspapers Limited. should be happy and commend them and not begin to make them feel like they have just killed somebody.
However, the problem is when the rules are not clear, or are being manipulated, or are being unfairly enforced. That is what should worry us. Nobody should argue against enforcement of regulations — that is why the rule of law is integral to a market economy. But I am really disturbed by MTN’s claims that they were not given fair hearing and all the documents they submitted for scrutiny were not even properly examined before the demands were made on them. Arbitrariness really, really bothers me. If it is true that investigators from the CBN and Office of the AGF ignored the evidences presented to them by MTN, then that would be catastrophic.
I understand that in calculating the “back taxes”, the Office of the AGF applied a flat rate of 10% for all withholding taxes (WHT). It also applied VAT to all items. WHT is usually applied at different rates — 10%, 7.5% and 5% depending on the item. In OAGF’s calculations, though, everything was charged at a flat 10%. Some items that are not VATable were also subjected to VAT by OAGF. These include jobs that did not involve the importation of equipment into Nigeria as well as funds from the International Finance Corporation (IFC) which are tax-free by World Bank treaty. I would think taxation matters of this nature should involve the FIRS since that is their job description.
I am also not among those saying because MTN is so big it should be treated with kid gloves. I’m sorry: the rules must apply to every player, big or small. I know we need all the foreign capital that we can get to breathe life into the economy, but then ground rules are ground rules. What I will not support, nonetheless, is targeting MTN for the enforcement of rules. MTN is the poster boy for foreign investment in Nigeria and we do not need to bully them. In addition to the capital they brought in 2001, they have been investing averagely $1 billion in the economy yearly. We have every reason to be fair to them without condoning infractions. We have to be transparently fair.
I would also appeal to the regulators to be less sensational. Some of these issues are sensitive and could induce negative chain reactions — and the damage might be irreversible. All facts must be on the table and all issues properly examined before actions are taken, not while discussions are still ongoing, in this age of whistle-blowing induced by 5% commission. No agency should create the impression that it is working to an answer. Regulation should be a balancing act; decisions should be arrived at only after carefully considering all sides, as well as immediate and future implications. I want firm regulation, I want sanctions for infractions — but justice be seen to be done.
In sum, I do not want to believe that the government has an agenda against MTN. While the telco’s failure to disconnect unregistered subscribers in 2015 was indefensible and they are still paying the penalty, I believe the disputes with CBN and OAGF should be carefully looked into to see that justice is truly and genuinely served. Issues like these are most certainly going to end in arbitration if the parties continue to maintain their positions. Whatever the case may be, still, the government has to be civil until there is a final resolution. Our ability to resolve all these regulatory issues with decency will count a lot in attracting more investments. It is not warfare. Maturity.