A compromise settlement with MTN Nigeria


Monday, June 13, 2016 10:26AM /FBNQuest Research

The local media reported on Friday that the FGN and the MTN Group, the leading mobile telephone operator in Nigeria, have settled their differences. MTN Nigeria is to pay a fine of N300bn (US$1.5bn) over three years and to list on the local stock market as soon as commercially and legally possible.

We recall the airing in the market of the view that the original fine of N1trn would scare off foreign investors. It would be fair to say that the FGN did not back off under the perceived pressure. We also recall that the size of the fine was based upon an established naira amount for each unregistered SIM card at a set point.

The fine was imposed by the Nigerian Communications Commission (NCC), the industry regulator. We assume, however, that this fine, and those levied by other public bodies, will be paid to the FGN and not the relevant regulator. This would be consistent with the determination of the federal finance ministry to maximize its non-oil revenue collection.

The fine is not a recovery as such and would presumably be treated in an accounting sense as FGN independent revenue, for which the 2016 budget projects a total of N1.51trn (US$7.6bn).
One third of the NCC’s fine on MTN Nigeria will not make a great impact on this target, which rests largely upon the implementation of the treasury single account.

The federal finance minister, Kemi Adeosun, said at the non-deal roadshow in London last week that she was confident the N350bn target for recoveries this year was attainable (
Good Morning Nigeria, 08 June 2016).

Adeosun noted the particular difficulty of making foreign recoveries, citing the US$320m of looted funds seized and still held by the Swiss government. For the FGN, the challenge is to convince the authorities in Berne that the funds, once returned, would not again go “missing”.
As for the listing of MTN Nigeria on the Nigerian Stock Exchange, we hope that it is not a token issue. This is the largest non-oil company in Nigeria, and the sector is among the most promising.

We draw the parallel with the listing of Safaricom in Kenya under an agreement between the government and the UK’s Vodafone. It has developed into both the largest company (like MTN Nigeria) and the largest listed company in the country.

Its share of the domestic mobile payments market had reached 67% at end-2015. The listing of Safaricom in Nairobi put the market on the international radar screen, having previously been of interest only to dedicated Africa funds.

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