South African telecommunications firm, MTN, has reached an agreement with the Central Bank of Nigeria (CBN) to resolve the dispute over illegal transfer of $8.1 billion out of Nigeria, its major market. MTN Group, which announced this via its Twitter handle, disclosed that it made a N19 billion ($53m) payment and is “engaging with banks regarding the agreement.”

The company, also in a statement issued to shareholders on the Johannesburg Stock Exchange (JSE) yesterday, said MTN Nigeria held various engagements to find an equitable resolution to the matter. Following the settlement, MTN’s stock rose by two per cent on the JSE. Its shares had been down by 16 per cent since news of the demand broke. The matter has lingered since August.

The firm, which controlled 39.7 per cent market share and services 66 million subscribers in Nigeria, revealed that a series of meetings were held in Lagos with CBN officials in November 2018.

“At these meetings, MTN Nigeria provided additional material documentation, which satisfactorily clarified its remittances. The CBN upon review of the additional documentation concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to its shareholders.

“However, the CBN maintains that the proceeds from the preference shares in MTN Nigeria’s private placement remittances of 2008 of circa $1 billion were irregular, having been based on Certificates of Capital Importation (CCI) that only had an approval in-principle, but not final regulatory approval of CBN,” the statement reads.

Furthermore, the CBN instructed MTN Nigeria to implement a notional reversal of the 2008 private placement of its shares at a net cost of about N19.2 billion – equivalent to $52.6 million (the notional reversal amount). This is on the basis that certain CCIs utilised in the private placement were not properly issued.

The statement said MTN Nigeria and the CBN agreed to resolve the matter on the basis that the firm would pay the notional reversal amount without admission of liability, while in terms of the resolution agreement, the CBN would regularise all the CCIs issued on the investment by shareholders of MTN Nigeria of about $402,625,419, without regard to any historical disputes relating to those CCIs, thereby bringing to a final resolution all incidental disputes arising from this matter.

The South African firm said the Nigerian arm relied on certain commercial banks to ensure all approvals had been obtained prior to the CCIs being issued and to ensure the CCIs were properly utilised in the private placement.MTN Nigeria will be engaging with the banks in relation to the issues dealt with in the resolution agreement.

The firm advised shareholders that the legal process initiated by MTN Nigeria for injunctive relief restraining the Attorney General of the Federation (AGF) from taking further action in respect of its orders for back taxes is continuing. It stated that the AGF’s matter came up for initial mention before the Federal High Court of Nigeria Lagos Judicial Division on November 8, 2018 and has been adjourned till February 7, 2019.

MTN Nigeria said it continued to maintain that its tax matters were up to date and no additional payment, as claimed by the AGF, was due, and consequently no provisions or contingent liabilities were being raised in the accounts of MTN Nigeria for the tax claims made by the AGF. “As a result of the above, shareholders are no longer required to exercise caution in dealing with the company’s securities.”

Recall that the apex bank had in August 29, 2018 ordered MTN and its four banks to refund $8.134 billion back into the country, sending the company’s shares plummeting. The CBN had explained that the sanction was due to irregularities with respect to repatriations made by four banks on behalf of MTN Nigeria Limited.

Commenting on the development, the chief executive officer, MTN Nigeria, Ferdi Moolman, said: “MTN is pleased to have been able to reach an agreement with the Central Bank of Nigeria to resolve these issues and remains committed to our long term strategy of investing in Nigeria’s telecommunications industry.”

Meanwhile, the persistence of MTN Nigeria might have paid off, as the Central Bank of Nigeria yesterday slashed the liabilities against the company to $1 billion at the exchange rate applicable at the time of the infraction – N192 per dollar.

The decision, according to the apex bank, was sequel to additional documentations provided, which cleared all the matters in dispute, except the initial repatriation of the preference shares.

A statement signed by the bank’s Director of Corporate Communications Department, Isaac Okorafor, stated: “CBN and MTN have mutually agreed that the aforementioned transaction be reversed notionally to bring it into full compliance with foreign exchange laws and regulations. The parties have resolved that execution of the terms of the agreement will lead to amicable disposal of the pending legal suit between the parties and final resolution of the matter.”CBN therefore assured foreign investors that the integrity of the Certificate of Capital Importations issued by authorised dealers remain sacrosanct and called on potential investors to take advantage of the investment opportunities in Nigeria.