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  • CBN may be shooting self in the foot over witch hunt of MTN

    The debate over the tax compliance of MTN and the alleged illegal transfer of equity through four banks have dominated the tabloids for the last few weeks. The findings were brought to public knowledge when the letters sent by CBN to the four banks in question were released to the public.

    These accusations have caused serious turmoil for MTN and its operations, so much so that Paul Theron – Veteran TV host and CEO of Vestact, a financial asset management company, has called out the Nigerian government in a statement saying “You could expect this kind of behavior from really third-string countries, but Nigeria is supposedly a country that takes itself seriously — it doesn’t seem to be consistent at all.”

    The letters revealed by the CBN detailed a number of transactions which may have violated foreign exchange laws, especially those regarding the repatriation of MTN assets via what has been called “illegal” CCIs (Certificates of capital importation).

    What this means in layman’s terms is that MTN transferred some of its assets from its country of origin to Nigeria, courtesy of a couple of banks and CBN is looking into the situation to validate if this process complied with its foreign exchange policies.

    These accusations have seriously hurt the market share of the telco giants, as recent reports show a plunge in the company’s share price with about $3 billion knocked off from its market capitalisation, after tumbling by 14 percent to a nine-year low of 2,030.76 NGN.

    It is safe to say the last 2 weeks have been less than pleasant for MTN Nigeria, and CEO Rob Shuter has decried the “peculiar and coincidental timing” of what appears to be a regulatory assault on its business in the country, but also reinforced MTN’s stance in proving its innocence of all allegations.

    The first part of this bizarre saga is how such high-level information has been able to become so public. Considering the media coverage that has followed this story, one may have confused this for a gossip feature. The “confidential” letters sent to these banks were rather unusually released to the public and the CBN further corroborated the story by tweeting about the investigations.

    The second interesting aspect of this story is how quickly the story has developed. From rumors and leaks to outright fines and even debiting of bank accounts, the speed with which this story has taken a turn for the worse, particularly for the banks, has been rather uncharacteristic of our usual tepid government.

    To provide a quick retrospective look and to put this into proper context, let’s look back at how the story has evolved since the CBN released those letters. The regulator immediately asked MTN to refund the sum of $8.1 billion dollars which it claims may have been illegally repatriated by the telecommunication company. While the 4 banks (Stanbic IBTC, Diamond Bank, Standard Chartered and CitiBank) were slapped with hefty fines ranging from NGN 250 million to NGN 2.4 million dollars.

    MTN on its part expressed its innocence explaining that the MTN Group and the original shareholders injected a total of $402, 625,419 into MTN Nigeria between 2001 and 2006 in the form of loans and equity. These initial inflows were the basis for the issuance of various legacy CCIs obtained from Authorized Dealers in accordance with regulations. All of these, including the inflow of capital, has long been confirmed by the CBN.

    The subject of “illegally” obtained CCIs has also been addressed. The reality is that the CCI process is essentially in place both for the protection of investors as well as to provide the CBN with documentary evidence for monitoring capital inflows and outflows.

    Although over time the CCIs have been reissued, consolidated and reconstituted to reflect the changing MTN capital and shareholding structure, the amount of NGN 402,625,419, has remained the same.

    One aspect of the changing capital structure was the conversion of shareholder loans to preference shares, meaning the latest transfer of equity is in no way a violation of the law.

    Section 15 (5) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 1995, states that, “The repatriation referred to in subsection (4) –  which deals with foreign exchange imported into Nigeria and its remittance – of this section shall be communicated by an authorized dealer to the Central Bank, within fourteen days of the repatriation and the Central Bank shall furnish same to the Minister on a monthly basis for information and statistical purposes only.”

    According to this law, this means that the dispute should be between the four banks and the CBN, not MTN, but once again, the brand’s name has been dragged through the mud without a proper investigation into the issue.

    Even after all parties expressed their innocence and provided substantial proof, the attorney general, reprimanded MTN again and slapped the company with $2.0 billion fine.

    The fine is due to alleged lack of tax compliance by the telco and this comes after the company has revealed its books detailing an assessment of the full period in question. The numbers indicate that the total payments made to the tax authorities in regard to these foreign imports and payments in aggregate are $700 million and also detailed the valid reasons for the differences between the actual payments and the Attorney general’s assessment.

    Through it all, the brand has remained calm and consistent with CEO Rob Shuter quoted by Bloomberg as saying that, “We have a proud history of being a major partner to the people of Nigeria and notwithstanding our current difficulties are firmly resolved to continue to do so”.

    One of the key talking points about this story is how MTN has once again become the scapegoat in yet another episode of what many are calling a witch hunt. The banks who were involved in this saga have been relegated to a sub-plot in a story which MTN is front and center, continually being labeled a villain.

    This would have been somewhat justifiable if the facts actually added up, but all indications suggest that the CBN may not have done proper investigations before name-dropping these brands.

    On MTN’s side of the story, the telecommunications giant has been open with their books, revealing their tax payments over the course of their operations in Nigeria, and even detailing their $18 billion-dollar investment in the country since it began operations. This is in addition to the N2 trillion paid in taxes and levies since it began operation since Nigeria.

    This is particularly worrying considering the latest revelations of dwindling foreign investment in Nigeria. In recent years, Nigeria’s FDI has been struggling. It reached a mediocre $981mn in 2017, a far cry from its previous peak of $5bn in 2008.

    The plummeting FDI situation is worsened by a poor investment climate characterized by overly stringent or impromptu government policies, bureaucratic bottlenecks for securing permits, and a weak legal framework.

    MTN is one of our most successful foreign investors and instead of encouraging the multi-national company, it seems like the government is hell-bent on frustrating the company.

    MTN has been slammed with fine after fine for some rather ludicrous reasons. Such punishments cannot be encouraging for would-be investors, many of whom already hold the notion that they are regarded as cash cows for exploitation by African governments.

    It is also noteworthy that Nigeria’s GDP hasn’t been impressive of late, the country has suffered a yearly dip since 2014 when it peaked at $568.5 billion. Even with the 0.82 percent increase 2017, the nation’s gross domestic output is still suffering from the inconsistency of oil prices. The real take away from these numbers is, looking at how much MTN has paid in taxes and levies (in excess of 2 trillion Naira), and realising just how big a contributor they are to Nigeria’s GDP.

    MTN has directly and indirectly, provided 500,000 jobs in Nigeria and has contributed immensely to the economy and it’s somewhat bizarre that such a huge company is being dragged in the mud before an appropriate investigation is even carried out.

    If MTN is guilty of these crimes then, by all means, they should face the penalty, but considering just how much facts have been provided by the telecom giant, they seem pretty convinced of their innocence. Furthermore, neither the CBN nor the attorney general has provided a direct response to the facts provided by MTN, making this whole ordeal even more worrisome.

    The reasoning for this inexplicable witch hunt is up for anyone’s guess. This may be due to a lack of oversight by the government or to protect private interests. However, the fact still remains, if the government and its policies continue to deter foreign investors, it is only a matter of time before we lose these multinationals.

    In a bid to protect its assets and investors against further action from the Attorney General of the Federation and the Central Bank of Nigeria, MTN on Monday, September 10th filed for an injunctive relief with the Federal High Court in Lagos.

    In a statement issued by the company, Tobe Okigbo, MTN Nigeria’s Corporate Relations Executive was quoted as saying;

    “MTN Nigeria Communications Limited (MTN Nigeria) continues to categorically and unequivocally deny all charges related to the Central Bank of Nigeria (CBN) and Attorney General of the Federation (AGF) investigations into the company’s CCIs and unpaid taxes respectively.

    “The simple reality is that MTN Nigeria has never repatriated dividends on the CCIs referenced by the CBN and that MTN is fully compliant with Nigerian tax law.

    “In order to protect MTN Nigeria’s assets and shareholder rights within the confines of the law, we have applied today in the Federal High Court of Nigeria for injunctive relief restraining the CBN and the AGF from taking further action in respect of their orders, while we continue to engage with the relevant authorities on these matters,”

    Only time will tell how this story will eventually end, but if history has taught us anything, it is that MTN will persist through this just like they have in previous occasions or maybe, just maybe this may be the straw that breaks the camel’s back.

    Tunji Andrews is Lead Economist at Time, Trade and Commodities (TTAC)

  • CBN: banks’ll pay N10,000 fine if money transfer exceeds four minutes

    The Central Bank of Nigeria (CBN) says banks will pay a fine of N10,000 for every money transfer that exceeds four minutes.

    The apex bank made this known in a circular, ‘Circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria’ issued to all deposit money banks, microfinance banks, other financial institutions, mobile money operators, development finance institutions, payment service providers and other stakeholders.

    The bank said any failed instant payment transaction not reversed into the customer’s account within 24 hours, based on the complaint of the sender and/or beneficiary will attract a fine of N10,000.

    According to the letter signed by ‘Dipo Fatokun, CBN’s director, banking and payments system department, the regulation will be effective from October 2, 2019.

    According to the apex bank, electronic funds transfer or a NIP happens between two distinct entities when the delivery from the sending entity to the receiving entity takes place within one minute (60 seconds), while a payments system where delivery to the receiving entity occurs beyond one minute is considered to be an ACH system.

    According to the document, on an occasion where a sending entity erroneously sends value contrary to the customer’s instructions due to wrong account number, wrong amount, duplication among others to a receiving entity and requested the reversal in writing within 14 working days of the transaction, the receiving entity should oblige within one business day without recourse to the customer (beneficiary) of the receiving entity provided funds are available.

    An automatic indemnity would be inferred against the sending entity making the reversal request.

  • Anxiety over CBN agribusiness loan

    There is growing anxiety over the agribusiness loan unveiled by the Central Bank of Nigeria with prospect beneficiaries expressing misgivings that they may be denied access to the facility.

    The new credit policy of the apex bank had pegged interest rate at 9 per cent for agriculture and manufacturing sector payable in seven years with a two years moratorium at maximum of N10 billion.

    Speaking with some farmers and agro-allied manufacturers, they expressed fears that the policy may never see the light of the day as it may become polarised along political lines.

    While recounting his unsavoury experience with the then Intercontinental Bank now Access Bank, the Managing Director of Adejumo Farms Lagos, Kayode Adejumo expressed pessimism that the current CBN policy may be difficult to access from commercial banks.

    Adejumo while noting that the loan policy may turn out to be a political jamboree or a plot by the current administration to stay in power beyond 2019, he maintained that he would never indicate interest on taking loan from Nigeria banks.

    “Commercial banks are the problems, they are not sincere. I’ve made up my mind that I will never collect loans from any Nigeria bank again, no matter the situation,” he stated.

    Echoing similar sentiments, another Lagos based crops/livestock farmer, Adekunle Ayandele expressed doubt on the policy.

    Ayandele said farmers and manufacturers who do not have politicians as godfathers may find it difficult to access the loan.

    “The fact is no continuity in such programme, if a government leaves, another one coming will have its own plan. Everything in Nigeria is politically-motivated no matter what they call it,” he said.

    Prof. Adi Bongo of Pan-Atlantic University, described the policy as ‘too little too late’.

    Bongo however tasked the federal government on the proper implementation of the scheme, saying agriculture and manufacturing are critical sectors that government should pay more attention to.

    “Agriculture is the only sector that survives recession and we don’t know if the loan will get to the people is meant for, but if it does it will it would boost productivity, but some us think that it should have come earlier,” he explained.

    In a related development, a renowned economist, Prof. Jonathan Aremu allayed the fears of people as to whether the funds could be misappropriated by politicians, stressing that the CBN will not dabble into such arrangement.

    “I believe the policy is a good development and I don’t believe that CBN will go to such arrangement that one have to be a party man or have a godfather to access their loan,” said Aremu, who retired from the CBN as an Assistant Research Director.

    It is however instructive to note that three weeks after the CBN announced the new policy regime on agribusiness loan, some of the commercial banks were yet to receive official correspondence on the policy.

    When this reporter sought to speak with CBN acting Director, Corporate Communication, Isaac Okoroafor on the outcome of his findings after visiting some commercial banks, he simply rebuffed him, hiding under the cloak that the reporter is not accredited by his media organisation to cover CBN.

    “I cannot speak with you on phone because I don’t know you. And the way you sound, you may misquote me. Secondly there are three people from The Nation who cover CBN, get in touch with any of those guys, let them call me or you put down your questions I will answer you,” he rebuffed.

     

  • $10.1b cash demand: MTN takes CBN, AGF to court

    Mobile giant MTN Nigeria has taken its battle of integrity to the court.

    It has urged the Federal High Court to restrain the Central Bank of Nigeria (CBN) and the Attorney-General of the Federation (AGF) from enforcing their orders that the telco should refund $8.1 billion and $2 billon to the Federal Government.

    The CBN accused the company of illegally repatriating $8.8 billion through improper Certificates of Capital Importation (CCI). The AGF is  seeking the payment of $2 billion in unpaid taxes over a 10-year period.

    Four local lenders, found wanting in the deal were fined. The fines have since been deducted by the CBN from their accounts.

    The firm has repeatedly rejected both allegations.

    Group Chief Executive Officer (CEO) Rob Shutter is sure  of an amicable settlement of the issues.

    Responding to a question on the crisis on the sideline of the ongoing International Telecoms Union (ITU) Conference at the International Convention Centre (ICC) in Durban, South Africa, Shutter said: “In all its 22 countries of operation, Nigeria is the telco’s largest market.

    The challenges of the past two weeks, he said, will be addressed.”

    The court processes notwithstanding, the telco will  continue to engage with the authorities on these matters.

    In a statement, MTN Corporate Relations Executive Tobe Okigbo said the telco “continues to categorically and unequivocally deny all charges related to the CBN and AGF investigations into the company’s CCIs and unpaid taxes respectively”.

    He said as previously disclosed, the CBN has alleged improper dividend repatriations by MTN Nigeria and requested that $8.1 billion be returned “to the coffers of the CBN, whilst the AGF has alleged unpaid taxes on foreign payments and imports and that approximately $2.0 billion in relation to these taxes be paid to the Federal Government of Nigeria (and now directed that the payment of the $8.1 billion is dealt with through his office rather than as directed by the CBN). MTN Nigeria has denied these allegations and claims.

    “Furthermore, four commercial banks were issued fines in respect of the administration of the CCI and irregular dividend repatriation and requested to return, in aggregate, the same $8.1 billion.

    “The allegations being made involve issues that appear to be complex and so are easily misunderstood and misinterpreted. They are made even more confusing when the relevant authorities send conflicting messages and instructions and act in a way that appears un-coordinated and at cross purposes.

    “The simple reality is that MTN Nigeria has never repatriated dividends on the CCIs referenced by the CBN and that MTN is fully compliant with Nigerian tax law.

    “With situations like this, it is vital for both the government, regulators and the company to have absolute clarity on the nature of both the allegations being made and the processes that are being followed.

    “In the absence of this clarity, our only option is to seek judicial intervention and to ask the courts to act as adjudicator. This has been done today.”

    Okigbo restated MTN’s commitment to Nigeria, pointing out that the company has not committed any offences and will continue to defend its position vigorously.

    “The company will continue engaging with the relevant authorities, and further information will be provided as and when available”, Okigbo assured.

     

  • ATCON faults CBN over $8.1b refund order to MTN

    The Association of Telecoms Companies of Nigeria (ATCON) has faulted  the order to refund $8.1billion handed to MTN Nigeria by the Central Bank of Nigeria (CBN), saying the apex bank has no power to do so.

    Its President, Oulsola Teniola, in an email report, said the cash in question belongs to MTN in the first place, wondering what the CBN wants to achieve by its order.

    The CBN has accused MTN of untidy business transactions involving alleged repatriation of $8.1billion which it ordered the carrier to refund, while the Office of the Attorney General of the Federation has also issued demand notice of $2billion unpaid taxes over a 10-year period to the telco.

    Four local lenders alleged to have facilitated the repatriation were also sanctioned by the apex bank but MTN has strongly denied both allegations, adding that it had the clearance of the apex bank and a clean bill of record with the tax authorities.

    Teniola said the industry does not understand what the CBN intends to achieve by the directive to an operator on which it has no regulatory oversight.

    He said: “It is very important to note that the figure referred to has almost been fully paid by MTN and that the $8.1billion doesn’t belong to CBN but belongs to MTN. So, on this basis, it is hard to understand  what CBN seeks (to achieve) by its demands on MTN that it doesn’t have regulatory oversight over.”

    On how the logjam could be resolved, he said dialogue and transparency would do the magic.

    “Clarity, transparency and continued dialogue among  CBN, the banks and MTN to amicably resolve this matter in the interest of the wider stakeholder community, especially, potential investors closely watching developments on this issue.

    “At the moment, processing of CCIs (Certificate of Capital Importation) is shrouded in confusion in what should be a relatively straight forward process in between the banks and CBN their regulator.

    According to him, there is no likelihood that MTN refund such huge cash because of its timing.

    He said: “A refund is very unlikely. The size of the demand and timing is unreasonable and not in the interest of the country. After all, the Naira equivalent will have to be returned to MTN Nigeria. It is then an interesting situation that this seeks to redress events that occurred when CBN had full oversight and approved the transactions. How do they intend to do that?”

    According to Teniola, the matter should be between the banks and the apex bank and not necessarily the banks’ customers (MTN).

    “This I believe is a matter that should be in between the banks and CBN and not the client of the banks. NCC may decide to intervene if events unfold that threaten the survival of MTN and the telecom industry that they regulate. For now, it is too early to see which way this will take,” he said, adding, however, that he is not in an official capacity or position to quantify or qualify the impact of the development to corporate brand of the telco.

    “I fully believe MTN will continue to engage with the relevant authorities to resolve this latest setback,” Teniola said.

    CBN, had in a letter to MTN, said its investigation revealed that the shareholders of the telco invested $402,590,261.03 in the company from 2001 to 2006, which was carried out through the inflow of foreign currency cash transfers and equipment importation, as evidenced by the CCIs issued by Standard Chartered Bank (SCB), Citi Bank (CB) and Diamond Bank (DB);  and the CCIs issued at the time of the investment by the above banks to MTN for $402,590,261.03 showed that $59,436,923.44 was invested as shareholders’ loan and $343,153,339.56 as equity.

    “However, a review of your organisation’s financial statements for the year ended December 31, 2007 revealed that $399,594,146.00 was recorded/invested as shareholders’ loan and $2,996,117 as equity investment, in accordance with the shareholder’s agreement but contrary to the CCIs issued by the banks

  • CBN: banks’ e-payment transactions hit N99.29tr

    The  value  of  electronic  payment transactions has risen by 39.7 per cent to  N99.29 trillion in one year, the Annual Economic Report of the Central Bank of Nigeria (CBN)  has shown.

    The 2017  figure was an improvement compared with  N71.1 trillion in   2016. The rise was   attributed   to increased consumer awareness and confidence in e-payment channels.

    Speaking on the report and economy, CBN Governor, Godwin Emefiele said 2017 was an enthralling and exerting one for  the  apex bank  and  for  the  Nigerian  economy  on  the whole.

    The  report showed that  CBN   received   2,236   scam   e-mails   and   acted   promptly   to   protect unsuspecting  people  in  Europe,  South  America,  Asia  and  Africa  from  falling victims  of  spurious  contracts.  Fifty-nine  (59)  complaints  were  received  from members  of  the  public  against  commercial  banks; some of Which were handled by the Bank and others referred to the Economic and Financial Crime Commission (EFCC), for necessary action.

    A  total  of  14 local  and  foreign calls were received  through  the  whistle-blowing  helpline,  and  treated, accordingly.  Employees  were  sensitised  to comply  with  the  Code  of  Conduct  Bureau  (CCB)  Act  on  Asset  Declaration.

    Also, the consciousness of employees  was  re-awakened on  the provisions  of  the   Code   of   Business   Ethics   and   Conduct   (COBEC)   and   compliance monitored.  A  total  of  5,436  and  6,065  employees  of  the  Bank  signed  the COBEC Acknowledgment and Oath of Allegiance and Secrecy Forms (Forms EO I and EO III), respectively.

    On  Anti-Money  Laundering  and  Combating  Financing  of  Terrorism,  the  CBN AML/CFT  Policy  and  Procedure  Manual  was  developed.  Furthermore,  the Bank  collaborated  with  internal  and  external  stakeholders  and  participated at the bi-monthly  meetings  of  the  Compliance  Officers  of  Banks  in  Nigeria (COBIN),  where  regulatory  and  law  enforcement  agencies, concerned  with the AML/CFT   issues, meet   to   enhance   cooperation   among   member institutions.

  • CBN debits four banks N5.87b for MTN deals

    MTN faults CBN on conversion

    The Central Bank of Nigeria (CBN) yesterday made good its threat to fine four banks that breached its capital importation policy N5.87 billion.

    The apex bank debited the account of Standard Chartered Bank with N2.4 billion, Stanbic IBTC N1.88 billion, Citibank Nigeria N1.2 billion and Diamond Bank N250 million for allegedly issuing irregular Certificates of Capital Importation (CCI) on behalf of some offshore investors of MTN Nigeria Communications Limited. MTN Nigeria was also directed by the CBN to refund $8.134 billion to its coffers.

    In a letter to the Nigerian Stock Exchange (NSE), Stanbic IBTC Bank informed investors and stakeholders that CBN had “unilaterally deducted” N1.886 billion from its account with the regulator, despite protestations by the bank that it did not violate any regulation on money remittances.

    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 letter, signed by the Group Company Secretary, Chidi Okezie, and Acting Head, Marketing and Communications, Bridget Oyefeso-Odusami, stated: “Following our earlier announcement to The Nigerian Stock Exchange (“NSE”) on 30 August 2018, in respect of the penalty of N1.886 billion imposed by the Central Bank of Nigeria (“CBN”) on our banking subsidiary – Stanbic IBTC Bank PLC (the “Bank”) in relation to the remittance of foreign exchange on the basis of certain capital importation certificates issued to MTN Nigeria Communications Limited, we write to update The NSE that the CBN has debited the account of our banking subsidiary with the CBN for the full amount of the above stated fine advised to the Bank.”

    Stanbic IBTC reiterated its position that it breached no extant laws relating to Certificates of Capital Importation (CCI) executed on behalf of MTN. “Stanbic IBTC Holdings PLC as well as our banking subsidiary maintain our position on this matter, which is the fact that the Bank has done nothing illegal and accordingly the bank will continue to provide CBN with documents and details in support of our contention that our actions in relation to these transactions were not illegal,” it said.

    The company reassured its stakeholders that the situation would not affect the seamless transactions with the bank.

    Stanbic IBTC Bank described the conclusions reached by the regulator as based on “factually incorrect premises”.

    Regarding the claim that the shareholders of MTN Nigeria invested $402,590,261.03 in the company from 2001 to 2006, the bank said: “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.

    A Standard Chartered Bank source said the bank’s account with the CBN was also debited. He said: “I can confirm to you that the CBN has debited all the four banks’ accounts with them today.”

    In statement, Citibank Nigeria Limited said: “Citibank Nigeria Limited (Citi) recently received a letter from the Central Bank of Nigeria (CBN) imposing sanctions on Citi for alleged breaches of foreign exchange regulations in respect of foreign exchange remittances done on behalf of a customer, MTN Nigeria Communications Limited”.

    “Citibank Nigeria Limited has sent a detailed response to the CBN addressing the serious allegations made in the CBN letter. Citibank Nigeria Limited remains committed to complying with all extant foreign exchange rules and regulations of the Federal Republic of Nigeria,” it said.

    Standard Chartered Bank, in a statement, said: “As previously disclosed, we are committed to fully co-operating with the regulators on this matter. Whilst we cannot provide additional information due to ongoing engagement with the regulators, we look forward to a rapid resolution and satisfactory outcome of this matter.”

    Financial pundits have continued to discuss the implications of the CBN’s action on the banks, especially for the three lenders with international franchise.

    Head of Treasury at Ecobank Nigeria, Olakunle Ezun, said all the banks have account with the CBN, it is easier for the regulator to sanction them than MTN Nigeria. “What the CBN did was to debit the accounts of the banks directly and send them debit advice. The fine is going to affect the banks profit and loss accounts for the year but the impact will be different across the banks,” he said.

    According to Ezun, all the four banks will report the fines in their 2018 financials while the quoted ones will also report to shareholders.

    “Standard Chartered Bank will inform the London Stock Exchange about the fine while Citibank Nigeria will report the fine to the New York Stock Exchange and will appear in their parent body’s financials for the year. Overall, the fine will affect the banks’ profit for the year and what will be available for shareholders’ sharing will reduce,” he said.

    Former Executive Director, Keystone Bank, Richard Obire, said for Citibank Nigeria, Standard Chartered Bank and Stanbic IBTC Bank, the parent companies will review what happened and if the management of the banks’ were culpable, will likely apply sanctions.

    He said also that if after the review of the alleged breaches and the management acted within regulation, then the parent banks will see the regulatory environment as harsh.

    “The foreign supervisors of the banks will review sanctions and the actions of the banks that led to them. Since they play in other markets, their findings will determine how they see regulation in Nigeria. But if the banks are found to be culpable, people will lose their jobs because they do not operate based on sentiments. They will see the affected staff as negligent and failing to carry out their duties with professional care.”

    Obire said such foreign banks take issues like reputational damage very seriously and see monetary loss as small compared with reputational damage.

    Another source said for Diamond Bank Plc, which is quoted, the NSE is yet to inform investors of its N250 million fine. It may also sanction the unit head that directly handled the transaction, he said, pleading not to be named.

    Former President/Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, said the management of the four affected banks are still in shock over what happened.

    “The first thing that will happen to the management of the four banks is that they will get shock. This will be followed by finding out what really happened and what they did wrong to get such penalties. The banks’ legal departments will also review the development and advise management on options open to them because they did not budget for the fine. The fine will definitely mess up the banks’ budgets for this year,” he said.

    According to Unegbu, it is likely that the management of the banks will be queried by the Board of Directors and where they believe the infractions were truly earned, there could be leadership changes.

    Progressive Shareholders Association of Nigeria Chairman Boniface Okezie, urged the CBN to always give priority to the survival of the banks and boosting depositors’ confidence. He said banks needed to be careful about the transactions they finance.

    Okezie said the shareholders in the quoted banks will have to wait endlessly to have dividends. “The banks will now begin to make provisions for the fines and dividend payment may not come soon. What has happened means that investing in the banking sector remains risky for investors. The shareholders are the biggest losers,” he said.

    WHO LOST WHA WHO LOST WHAT

    • Standard Chartered Bank N2.4b
    • Stanbic IBTC N1.88b
    • Citibank Nigeria N1.2b
    • Diamond Bank N250m

  • Forex: CBN gives market $210m boost

    The Central Bank of Nigeria (CBN) has made available the sum of $210 million, to meet customers’ requests in various segments of the foreign exchange market.

    The CBN, in its quest to meet customers’ needs in the various segments of the market offered $100million to authorised dealers in the wholesale segment of the market, while the Small and Medium Enterprises (SMEs) segment got boosted with the sum of $55 million.

    According to figures obtained from the apex bank yesterday, customers requesting foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were also allocated the sum of $55 million.

    It will be recalled that the bank last Tuesday intervened to the tune of $210 million to cater for requests in the wholesale segment of the forex market.

    Meanwhile, the naira continued its stability in the FOREX market, exchanging at an average of N361/$1 in the BDC segment of the market on Tuesday, September 4, 2018.

  • CBN ‘probed MTN, banks for 30 months’

    The Central Bank of Nigeria (CBN) decided to punish MTN Nigeria and four banks for forex infractions after a painstaking investigation spanning 30 months, CBN Governor Godwin Emefiele has said.

    Emefiele, who spoke in China, said he wanted to clear the air because the matter and the offences committed by the entities concerned were very weighty and had attracted global attention.

    He said the total amount to be repatriated by the banks and MTN stands at $8.14billion, adding that when the payment is received, the CBN would credit the company with the naira equivalent at the exchange rate at which the transactions were consummated.

    The CBN governor said “It is important to stress that the CBN examiners had been investigating three charges of infractions against the four banks and MTN, particularly the manner of funding the equity investment into MTN and the subsequent capital repatriation that resulted thereafter.”

    Emefiele told Busiess Day, as quoted by online medium, The Will, that “the investigation was in two parts, the first allegation started about two and a half years ago, when examiners began to investigate;

    The method of payment for shares by local shareholders in MTN International, which is the sole owner of MTN Nigeria.

    Whether the banks breached the extant regulations requiring banks to issue CCIs within 24 hours of receipt of funds inflowed into Nigeria.

    On the 1st charge regarding investment by local shareholders, the CBN examiners discovered that the local investors, purchased forex from the Nigerian foreign exchange market, repatriated the funds and these funds formed part of the total funds inflowed by MTN totaling $402m between 2001 and 2003. By the extant regulation, only funds inflowed into Nigeria qualify for the issuance of CCI. However, examiners observed that the extant forex regulations at the time of investment allowed Nigerians to purchase shares with foreign currency. So, whereas you would say that the investment of the local shareholders should be voided because the funds came from within Nigeria and were round tripped, you can also say that it is allowed because Nigerians were allowed to invest in foreign currency assets. So we reasoned that since this transaction happened over 10 years ago and the company was doing well, we should grant them a waiver.

    On the Second offence regarding the CCIs, the regulation provides that banks must issue CCIs for inflowed funds within 24 hours. The examiners reported that the banks failed to issue some of the CCIs within 24 hours; which is sanctionable. Again the CBN decided to overlook this offence given that these transactions took place over 10 years ago.

    It was based on these facts that the CBN wrote the letter dated February 22, 2017 granting MTN the permission to continue paying dividends on the CCIs. So when our Directors were summoned by the Senate to provide the CBN perspective, they told the Senate that the CBN had pardoned the offences and based on this, the Senate towed the same line with the CBN and cleared MTN and the banks of the issues.

    Now the third offence, which is actually the crux of the matter in dispute now relates to the unauthorized conversion of a loan of $399 million to preference shares by the MTN and the banks and thereafter repatriated the sum of $8.1 billion without CBN final approval.

    The facts from the last examination which commenced in March 2018 is that, at the inception of the company, the shareholders inflowed the sum of $402million and reported that $343million was equity and $59 million as loan. The examiners later discovered that in its 2007 audited accounts MTN’s auditors reported that the investment of $402million was stated as $2.99million in equity and $399m as loan, a statement that is in conflict with their earlier disclosure and on the basis of which CCIs had long been issued to the company. Soon after, the company, through its bankers approached the CBN for the conversion of the loan of $399million to Preference shares. The CBN thereafter gave an Approval in Principle subject to fulfilling certain conditions. Notwithstanding, the Company and the bank went ahead and concluded the conversion to Preference shares without CBN’s final approval and based on this, repatriated the sum of $8.1billion outside the country.

    The CBN felt this was too grievous and that this couldn’t be ignored. When the Committee of Governors was informed about this breach, it sounded unbelievable. In order to give the MTN and the banks a fair hearing, a meeting comprising the CBN Committee of Governors, the over 20 Examiners, the MTN officials and the banks was held on May 25,2018. At this meeting, we gave the company the opportunity to defend itself over the breach but unfortunately, it couldn’t. In fact the bank that concluded the conversion, apologized; stating that it was an unintended error. The COG was alarmed that a bank could ignore CBN’s directive requiring final approval before such a huge transaction could be consummated. The COG further directed MTN and the banks to meet with the examiners to provide any evidence within one week that could convince the examiners to change their position. Indeed, the deadline for the submission of documents and evidence was extended to over 12 weeks. Despite granting these extensions, the examiners position never changed, as the Company and the banks had no new evidence to provide. Based on this, the examiners concluded their reports and made their recommendations which was subsequently adopted by the COG.

    However, as it stands, letters of sanctions have been sent to all parties. This explanation has become necessary so as to clear certain misconceptions currently circulating in the public domain.

    The banks hit by capital importation breach allegations yesterday continued to defend their integrity.

    The lenders are also claiming that the transactions in question were approved by the apex bank, which fined them N5.8 billion.

    The CBN directed Standard Chartered Bank, Stanbic IBTC Bank, Citi Bank and Diamond Bank to pay N5.8 billion fines and refund alongside MTN $8.1 billion said to have been repatriated illegally. The banks have begun engaging the CBN to state their sides of the story.

    The banks allegedly issued irregular Certificates of Capital Importation (CCI) 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 directed to refund $8.134 billion to the CBN’s coffers.

    The apex bank said its investigation was triggered by “allegations of remittance of foreign exchange with irregular 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 banks are insisting that the apex bank vetted and approved the transactions. Sources within CBN who are familiar with the development confirmed that the banks and MTN have been engaging key CBN officials to see that the issue is revisited.

    “What is important is that the CBN has sent a clear signal to all parties that it cannot be business as usual anymore,” an official said. 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.”

    MTN has argued that it adhered to all extant laws in the payment of dividends to its shareholders between 2007 and 2015.

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

  • The CBN/MTN Fine Issue – Facts v.s Fiction

    The Central Bank of Nigeria announced on Wednesday, 28th August, 2018, that it is imposing sanctions on four (4) banks for facilitating the ‘illegal’ repatriation of capital from Nigeria on behalf of MTN Nigeria and its shareholders.

    This surreptitiously followed the publication of an ‘exclusive’ in Sahara Reporters alleging that  Central Bank Governor, Godwin Emefiele, was reluctant to fine unspecified individuals and corporate bodies other entities for unlawful conduct in respect of repatriation of dividends to offshore shareholders of MTN Communications Nigeria Limited.

    This follows in the heels of a N330 billion fine that was imposed on the Information and Communications Technology (ICT) company by Nigeria’s telecommunication regulator, Nigerian Communications Commission (NCC) in October, 2015.

    The hefty fine has since resulted in a very significant fall in MTN Nigeria’s share price and the timing of the fining, coupled with continuously rising red flags has developed intense speculation as to the veracity of the allegations that have been made.

    This has brought to the fore certain issues that require answers:

    The DSS and National Assembly investigations’ were completed  in 2016 and 2017, what has spurred on the CBN to act at this moment? If the Central Bank of Nigeria  has approved the accounts of these (Standard Chartered, Stanbic, Citibank and Diamond) banks for the last ten years and continued to approve the repatriation of funds by MTN, then could it have knowingly approved transactions it believed to be fraudulent?

    When  did the CBN determine that MTN and the banks were culpable of such ‘illegal conducts’ and what has caused the CBN to allow MTN to repatriate funds since 2015?

    Why do the these infractions cover only the period 2007 to 2015? What conditions changed in 2015? Does this allude to the fact that all MTN dividend and capital repatriation payments since 2015 will be deemed illegitimate or fraudulent? If so, how will that be possible, with the same CCIs issued?

    These niggling questions need to be answered as soon as possible as investor confidence in Nigeria is quickly depleting as a result of the recent actions of NCBN.