History of Disregard for Nigerian Laws by MTN

by Henry Onyema

Since MTN officially entered into the Nigerian Telecoms Market in 2001, the company has had a notorious history of flagrant disregard for extant Nigerian Laws. Here are many instances.

(1) N330 BILLION FINE FOR UNREGISTERED LINES

As part of efforts to check terrorism, kidnapping and other heinous crimes in the country, the Nigerian Communications Commission, NCC issued a directive to all telecoms companies operating in the country to ensure that all active telephone lines in the country were registered. A fine of N200, 000 per telephone line was fixed as penalty for non-compliance. While other telecom firms made significant effort to ensure substantial compliance, MTN practically took the regulator for granted and continued to allow unregistered Sim-cards to make active calls on its network. The reckless action of MTN gave leeway to insurgents in the Northern parts of the country to unleashed mayhem on the nation.

When NCC undertook its first assessment of compliance in 2015, the regulator discovered that MTN was in flagrant breach of its directive. According to NCC findings, about 5.2million subscribers on MTN network were unregistered.

Irked by the barefaced disregard for the country’s laws, NCC slammed MTN with N1trillion ($255 million) fine. The firm initially sued the regulator, but it backed down later and reached a deal with the authorities to pay a reduced sum of NGN330 billion (around US$1 billion).

There were initial allegations of back-channeling leading to the settlement. For instance, President Muhammadu Buhari's Chief of Staff Abba Kyari allegedly received a US$2 million bribe from top MTN figures to influence government decision in favour of the firm. An investigative panel however cleared Kyari of the allegation. The company was later allowed to settle the fine in three instalments.

An in-house cleansing by the tech firm led to a major resignations among the top echelon of the organization including the chief executive officer, Sifiso Dabengwa, the Head of Nigeria Operation, Micheal Ikpoki and the Head of Cooperate Affairs, Akinwale Goodluck being replaced with Phuthuma Nhleko, Ferdi Moolman and Amina Oyegbola as new chairman, managing director and Head of Corporate and Regulation respectively.

(2) ILLEGAL REPATRIATION OF N8.1 BILLION 

Three years after facing a record-breaking $5.2 billion,  MTN,  again ran into trouble with the Nigerian government over the illegal repatriation of $8,134,312,397.63 from the country, in violation of the extant laws and regulations.

The illegal foreign exchange remittances to MTN’s parent company in South Africa, was allegedly done through four Nigerian banks- Standard Chartered Bank, Citibank Nigeria Limited, Stanbic IBTC Bank Limited and Diamond Bank Plc. 

The bank's were found to have helped MTN illegally repatriate $8.134 billion between 2007 and 2015, despite the fact that the telecoms giant was in violation of the extant Nigerian foreign exchange and anti-money laundering laws.

The four banks were directed by the CBN to refund the $8.134 billion with immediate effect and were respectively fined  for the various violations regarding the remittances undertaken on behalf of MTN Nigeria.

How the illegal act was carried out

After the issuance of its operating licence by the Nigerian Communications Commission (NCC) in 2001, the shareholders of MTN Nigeria invested the sum of $402,590,261.03 between 2001 and 2006 to fund its investments in the country by way of inter-company loans and equity investments.

The investments were carried out through the inflow of foreign currency cash transfers and equipment importation, which was evidenced through the Certificates of Capital Importation (CCIs) issued by the four banks.

The CCIs issued at the time of the investment of $402.6 million showed that $59,436,923.44 was invested by way of a shareholder loan and $343,153,339.56 as equity.

However, this position was contrary to MTN’s financial statement for the year ended December 31, 2007, which showed that $399,594,146 was invested in the firm by way of a shareholder loan and $2,996,117 was invested as equity investment, in accordance with the shareholder’s agreement, but contrary to CCIs issued by StanChart, Citibank and Diamond Bank.

This was deemed as a rendition of false returns by the banks to the CBN.

Following  MTN’s request through StanChart for CBN’s approval to convert the $399.6 million to preference shares, an approval-in-principle was granted by the central bank vide a letter dated November 13, 2017; with the grant of a final approval after MTN must have fulfilled certain conditions.

The conditions were for the implementation of the decision through a board resolution by MTN and the submission of documentary evidence to that effect to the Director, Trade and Exchange Department with the CBN.

The second condition was for the provision of an undertaking that no remittances will be made for either of the interest or the principal repayment would be made to the shareholders from the date of the loan to the date they converted to preference shares.

But MTN failed to meet the conditions, and despite its non-fulfillment of the conditions, which led to the non-issuance of a final approval by the CBN, the telecoms firm went ahead to convert the shareholders’ loan to preference shares, following which StanChart issued new CCIs in respect of the illegal conversion.

On account of the illegal conversion of the interest-free shareholder loan of $399.6 million, the sum of $8.134 billion was illegally repatriated on behalf of MTN by the four banks between 2007 and 2015.

Other findings made by the CBN included the discovery that StanChart issued three CCIs outside the regulatory 24 hours without the approval of the central bank.

StanChart, also in contravention of Memorandum 24(ii) of the Foreign Exchange Manual, which stipulates that CCIs should be transferred based on a customer’s instructions to a bank of the customer’s choice along with the transaction history of the CCI, StanChart provided confirmations to Citibank and Diamond Bank, instead of transferring the CCIs to them as required by the FX Manual.

It was discovered that the two banks, on the strength of StanChart’s confirmation, subsequently remitted various sums as dividend from MTN Nigeria at different times.

Owing to the hefty infractions committed by StanChart, the Central Bank ordered the bank to refund $3.448 billion with immediate effect to the CBN, being the sum repatriated by the bank on the basis of illegally issued CCIs.

It also fined the bank to the tune of N2,470,604,767.13 for the various violations of the extant laws and regulations in its foreign exchange dealings regarding the remittances on behalf of MTN.

In September, 2018 MTN filed an action before the Federal High Court, Lagos seeking to restraining CBN from implementing sanctions against it over the alleged illegally repatriated fund. The firm in December, however backed out of the suit and agreed to settle a negotiated fined which was later reduced by CBN to $52.6 million.

(3) $2 BILLION UNPAID TAX

MTN reputation was dealt a further blow when the Federal Government after a thorough investigation, uncovered its unpaid  $2bn in tax arrears on imported equipment and payments to suppliers.

The Attorney General of the Federation and Minister of Justice, Abubakar Malami, in a letter to the company, said the import duties, Value Added Tax and withholding taxes on foreign imports/payments dated back to 10 years.

The attorney general notified MTN that his office made a high-level calculation that MTN Nigeria should have paid approximately $2bn in taxes relating to the importation of foreign equipment and payments to foreign suppliers over the last 10 years.

News of the unexpected tax bill sent MTN shares tumbling by as much as 7.5 percent to an almost 10-year low in the Johannesburg Stock Exchange.

Immediately the discovery was made, MTN again ran to the court seeking a restraining order against the Federal Government.

The matter is ongoing and as at the last hearing, was adjourned to June, 26, 2019.

(4) MASSIVE CASUALIZATION OF WORKER

Although Nigeria is MTN's biggest market, the company in total regard for Nigerian Labour Laws, has one of the largest number of casual workers. 

MTN Nigeria, since it commenced operations in Nigeria and in clear violation of extant national and international labour laws, especially ILO Conventions 87 and 98 has denied its workers the fundamental principles of the rights at work.

It similarly indulges in other anti-labour practices such as casualisation for nearly all types of work, fixed- term contract work for Nigerian workers, worst forms of precarious work, etc.

Last year, the Nigeria Labour Congress, after series of appeal decided to picket office of the company Nationwide to press home their demand to end the wicked labour practice. Many offices of the company were shut down by labour leaders in effort to force it to comply with Nigerian Labour Laws.

(5) ILLEGAL CAPITAL MARKET LISTING

MTN Nigeria officially listed its shares on the floors of the Nigeria Stock Market, MTN, last week but unknown to many Nigerians the entire process is a big sham waiting to be exposed.

Contrary to Security and Exchange Commission, SEC,  guidelines, the company failed to disclose to regulators legal disputes which when  decided by the court may adversely affect the true share value and structure of the company. By implication, such suits, when decided, may ultimately rendered the listing of MTN shares null and void.

One of such suits, is the one filed by a senior legal practitioner, Dr. Charles Mekwunye before a Federal High Court sitting in Abuja seeking to stop the planned listing of MTN shares on the floor of Nigeria Stock Exchange.

In the suit marked as FHC/ABJ/CS/2019, Dr Mekwunye is asking the court for a perpetual injunction restraining SEC from going ahead with the listing of MTN shares pending the determination of a suit number  before the Supreme Court bothering on alleged breach of contract in the massive divestment of MTN assets filed at the Federal High Court, Lagos and two other appeals no SC/502/2018 and SC/503/2018.

The plaintiff is also asking the court to direct the defendants to maintain status quo ante regarding the listing of MTN shares and a further order nullifying all approvals given to MTN by SEC and NSE towards facilitating the listing of its shares.

Mekwunye is also praying the court for an order of mandatory/ restorative injunction setting aside and or nullifying all actions taken including notices, resolutions and authorizations etc by MTN with a view to facilitating the listing of its shares.

Dr. Mekwunye had in 2008 dragged MTN, Lotus Capital and Stanbic IBTC Asset Management, IHS Holding LTD and INT Towers Ltd before the Federal High Court over alleged breach of contract and the alleged unlawful massive divestment of MTN assets to INT Towers

Mekwunye claimed at the lower court that MTN through its appointed nominee, Stanbic IBTC Asset Management and LOTUS Capital defaulted in a share investment agreement with him.He urged the court then, to restrain MTN from listing its shares on the stock market pending the determination of the suit.

But ruling on a preliminary objection raised by MTN on the competence of the suit, the trial Judge, Justice Mojisola Olateru, asked parties in the suit to explore the arbitration clause embedded in the contract between Dr. Mekwunye and Lotus Capital, Stanbic IBTC and MTN.

Dissatisfied with the ruling of the lower court, Mekwunye filed a motion on notice on February 26, 2018 at the Court of Appeal arguing that an arbitration clause in agreement between him and MTN cannot be used to determine the suit involving IHS Holdings Ltd and INT Towers Ltd who are not parties to the arbitration clause.The Court of Appeal in its ruling also asked parties in the suit to pursue arbitration earlier pointed out by the lower court.

Still not satisfied with the ruling of the Court of Appeal, Mekwunye took the matter to the Supreme Court, insisting that the crux of the matter is the failure of the respondents to list MTN shares in NSE in 2011 as agreed by parties and that until the suit is properly determined, MTN ought not to be allowed to list its shares at the stock market.

In total disregard of this court action which was served on SEC and NSE and was received by Okpobia Oghenekevwe, NSE Head of legal at about 9:12am on May 16 before the listing of MTN shares  in accordance with the affidavit of service file by the baillif of the court which has grave consequences on its share structure, MTN forged ahead with its listing agenda. 

These pending litigations should be of concern to regulators, Nigerians and foreign investors as Nigeria is surely a nation of rule of law.