Banks, MTN Engage CBN Over $8.1b Fine; Factually Incorrect Premises Highlighted


Monday, September 3, 2018  12:58PM / News & Investigations

Sequel to the order by the CBN which directed four commercial banks, namely Standard Chartered Bank, Stanbic IBTC Bank, Citi Bank and Diamond Bank to pay fines totaling N5.3b as well as refund alongside MTN, the sum of $8.1b said to have been repatriated illegally, banks have begun engaging the CBN to state their sides of the story. 

On Wednesday, 28 August 2018, the CBN directed four banks, namely Citibank, Diamond Bank, Stanbic IBTC and Standard Chartered Bank, to repay the sum of N5.87 billion for allegedly issuing irregular CCIs on behalf of some offshore investors of MTN Nigeria Communications Limited. Standard Chartered Bank was fined N2.4 billion, Stanbic IBTC N1.8 billion, Citibank Nigeria N1.2 billion and Diamond Bank N250 million. MTN was also directed by the apex bank to refund $8.134 billion to its coffers. 

The apex bank said its investigation was triggered by “allegations of remittance of foreign exchange with irregular Certificates of Capital Importation (CCI)” between 2007 and 2015, in “flagrant violation of extant laws and regulations of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006”. 

The institutions have begun engaging the CBN to state their sides of the story, especially as the apex bank vetted and approved the transactions in question. Sources within CBN who are familiar with the development say that all of the banks as well as MTN have been engaging key CBN officials, including its governor, by phone calls, physical visits and even formal correspondence, in the hope that the CBN ruling may be revisited. “It’s been a hectic two days for all of us, but it is well worth it,” our source who understandably declined to be named, said. “What is important is that the CBN has sent a clear signal to all parties that it cannot be business as usual anymore.” He added that “even though we are not averse to reviewing the cases, I cannot assure you that the CBN is in any position to review these fines which are the end-result of painstaking investigations.” 

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MTN, for instance, has in its submission, argued that it adhered to all extant laws in the payment of dividends to its shareholders between 2007 and 2015. Its chairman, Mr. Pascal Dozie, who is also founder and former chairman of Diamond Bank, is understood to have made phone calls to the CBN Governor seeking a middle ground out of the current imbroglio. MTN’s local shareholders are said to be looking up to Dozie as a respected banker and long-term operative in the financial services sector to help the organization intercede and resolve the logjam. Other directors such as Gbenga Oyebode, who until recently was chairman of Access Bank, are also under pressure from MTN Group headquarters to help resolve the lingering issues. 

It was reliably gathered that in its official response to CBN, Stanbic IBTC Bank described the conclusions reached by the regulator as based on ‘factually incorrect premises’. According to sources privy to the engagements, Stanbic IBTC Bank reminded the CBN of the outcome of its findings on the same issue following a special examination that was conducted in March this year. The finding reportedly cleared the bank of any wrongdoing as its actions were in line with extant rules and regulations. 

Going into a point-by-point rebuttal, the letter from the bank examined different allegations contained in the CBN letter. Regarding the claim that the shareholders of MTN Nigeria invested the sum of $402,590,261.03 in the company from 2001 to 2006, the bank states as follows: “The twenty certificates of capital importation CCIs transferred to our bank by Standard Chartered Bank and which were in the above quoted sum, were re-issued from existing CCIs that had been issued by Standard Chartered Bank to the original investors in MTNN.” It added that “these CCIs were transferred to our Bank to facilitate the repatriation of the proceeds of MTN’s Private Placement which took place in February 2008.


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CBN had also alleged that “on account of the illegal conversion of the shareholders loan to preference shares (interest free loan) of USD399,594,146.00, the sum of USD8,134,312,397.63 was illegally repatriated by Stanbic IBTC Bank and other banks on behalf of MTN Nigeria between 2007 and 2015.” Stanbic IBTC denied it was “involved in the conversion of the shareholders loans, nor did it carry out any amendments to the CCIs issued in respect of such loans to accommodate these conversions.” The bank added that the repatriations effected in this case “were related to the sale of Linked Units (comprising ordinary shares and preference shares) by existing shareholders of MTN as well as dividends validly declared and paid by MTN,” and that the “repatriations were effected on the basis of the CCIs transferred to it by Standard Chartered Bank, which indicated they had been issued in respect of investments in such ordinary and preference shares.”    

The apex bank had also alleged that Stanbic IBTC Bank “issued eight CCIs of USD58,359,616.67 in respect of foreign exchange sourced locally as shareholders loan” in contravention of the requirement of section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 and Memorandum 20(1.3) (III) of the Foreign Exchange Manual, which stipulate that CCIs should be issued on capital imported.” Stanbic IBTC said it was not aware “at the relevant time that the affected investors in the MTN Private Placement had obtained foreign exchange loans from local banks for the purpose of their investments.” And that in any case it was not mandated by law to investigate whether an invested fund is borrowed or not but rather was obliged to ascertain that an investor had transferred the necessary funds to the stipulated accounts. 

On the allegation of issuance of CCIs outside the stipulated time of 24 hours in contravention of Paragraph 4.1.1 (IV) of the Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2012 to 2013, Stanbic IBTC said it “acted in line with all known rules.” It also debunked the allegation that it deliberately “failed to issue a letter of indemnity to the CBN against double remittance in respect of 20 CCIs transferred by Standard Chartered Bank as required by law. According to Stanbic IBTC Bank, the delay was caused by Standard Chartered Bank’s “delay in issuing it the required indemnities” as specified by regulation.  

Based on these rebuttals, Stanbic IBTC Bank has urged the Central Bank of Nigeria to re-evaluate the facts of its investigation into what the apex bank called ‘irregular’ capital importation certificate issuance by it and the other affected banks, as well as MTN Nigeria. 

The bank had, in a letter dated 30 August 2018 to the Nigerian Stock Exchange (see reference 6 below), pledged to hold “further engagements with the CBN, in relation to the issues it has raised, while reassuring customers that the matter would not affect their ability to continue to conduct various business and corporate transactions with Stanbic IBTC Holdings or any of its subsidiaries, including the Bank.

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