Nigerian regulators this week fined South African mobile phone company MTN $5.2-billion — about a quarter of Nigeria’s annual budget — and targeted another South African company, raising fears it’s open season on South African business, DailyMaverick reported.
Nigeria is at risk of scaring off investors it can’t afford to lose by going after MTN, the country’s largest mobile-phone company, analysts said, according to Bloomberg. MTN had 62 million Nigerian customers inSeptember
The fine against Africa’s largest cellphone company was unprecedented, amounting to 20 percent-plus of MTN’s market value. It threatens the firm’s future in Nigeria, its largest and most profitable market, and caused a 16-percent drop in MTN share prices.
Nigerian regulators say MTN failed to deactivate unregistered sim cards fast enough. They are considered a major security threat by the Nigerian government, which says unregistered sims with anonymous phone numbers aid terrorism and crime.
The government said the fine is designed “to ensure that the willful non-compliance ceases.”
Without a finance minister, Nigeria’s economy is struggling to cope with currency issues and falling oil prices. Penalizing one of their largest foreign investors is not going to help, siad David McIlroy of Alquity Investment Management Ltd. in a Bloomberg interview. Alquity oversees frontier market stocks including MTN shares.
“It’s concerning for MTN and in terms of the wider implications for foreign investment,” McIlroy said.
The fine came on the same day that Stanbic IBTC, the Nigerian subsidiary of South Africa’s Standard Bank, was ordered to withdraw and restate its 2013 and 2014 financial statements amid suspicion of “accounting irregularities and poor disclosures,” DailyMaverick reported. Four directors including the current CEO have been suspended until the matter is resolved.
“Both MTN and Standard Bank’s Nigerian operations were hammered on the same day, which may look like a South Africa-focused clampdown,” said Stuart Lowman, business reporter for South African site biznews.com.
Nigeria overtook South Africa to become the largest economy in Africa in 2014, and the two countries are fierce economic rivals. South African companies are much better represented in Nigeria than the reverse, which creates its own tensions, DailyMaverick reportec.
“The perception of South African companies in Nigeria is not good, despite the good practices of many South African companies,” said Martyn Davies with Deloitte-Frontier Advisory, a market consultancy. “The general state of relations is not positive, and this certainly can’t be helping things.”
Davies warned that the government’s budget shortfall will make life more difficult for foreign companies already in Nigeria, and discourage others from investing. Foreign companies are already finding it harder to take money out of the country as regulators interpret rules more strictly.
“Nigeria’s fiscus is in serious trouble,” Davies said. “Whatever way the Nigerian state can recoup lost revenues from oil, then so be it.”
Confidence is eroding in President Muhammadu Buhari, TheGuardian reported. He was something of a rock star leading up to his election. People cried when they saw him. Now citizens are getting testy.