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South African Reserve Bank says MTN's USD 10 bln Nigerian dispute poses risk to SA financial system

Thursday 8 November 2018 | 09:13 CET | News

MTN Group's dispute with Nigerian authorities over USD 10 billion in repatriated funds and back taxes could increase risk in South Africa's financial system, depending on the outcome, the South African Reserve Bank said, according to Bloomberg. In its Financial Stability Review released in Pretoria, the bank said if MTN eventually repatriates the disputed amount to Nigerian authorities, this could affect its ability to meet its debt obligations, especially in South Africa. 

Given the interconnected nature of the financial system, if the immediate or near-term repatriation of the funds to the Nigerian authorities affects MTN Group’s ability to meet its debt obligations, this could increase systemic risk. The claims amount to almost all of MTN’s market value of about USD 12 billion, the bank said. 

The potential worst-case scenario would be for MTN to pull out of Nigeria, which would increase its exposure level to reputational risk, the Reserve Bank added. In late August, the Central Bank of Nigeria alleged that MTN and Standard Chartered, Citigroup, Stanbic IBTC and Diamond Bank had illegally repatriated USD 8.1 billion from Nigeria, and the office of the attorney general claimed the company failed to remit USD 2 billion in back taxes. 

In order to protect its assets and interests of its shareholders, MTN Nigeria had applied to the Federal High Court of Nigeria for an order restraining the Central Bank of Nigeria and the Attorney General of the Federation from taking further action against it. In October, the CBN filed a countersuit, pleading that the court should not grant an injunction to stop MTN Group transferring the disputed USD 10 billion back to Nigeria. It also asked the operator to pay 15 percent annualised interest on the sum until the courts made a judgment, and 10 percent from then until the whole amount was paid.




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Categories: Mobile & Wireless
Companies: MTN / MTN Nigeria
Countries: Nigeria / South Africa
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