skip to Main Content
Menu

MTN IN NIGERIA: A POISONED CHALICE?

MTN IN NIGERIA: A POISONED CHALICE?

In his magisterial chronicle of Nigeria since independence, the eminent scholar Eghosa Osaghae titles his book Crippled Giant. The title is deliberate as a metaphor of a country that, in the main, has been crippled by circumstances of its own making. Despite the magnitudes of its human and economic potential and muscular political and diplomatic influence, Nigeria has experienced accelerated decline and decay. This not only has to do with its political stagnation and retarded economic growth because decline and decay are not emergent conditions of the Nigerian polity. On the contrary, these conditions have rather become endemic and are deeply entrenched in the anatomy of its state apparatus, with direct consequences for its social and economic milieux.

It is into this environment that many South African companies sought to bring their comparative and competitive advantages after 1994 since Nigeria offered fertile and abundant commercial and business opportunities based on its economic and demographic dimensions: it has a nominal GDP of $380 billion and a population of 190 million. Most crucially, the intentions of South African companies were further inspired by the close relationship that President Thabo Mbeki developed with his Nigerian counterpart, Olusegun Obasanjo; both not only sought to forge closer bilateral ties but saw their partnership as part of a strategic calculus for a revived pan-Africanism. Emblematic of this growing bilateral chemistry was the establishment of a high-level Bi-National Commission in 1999 as a mechanism for dialogue across a range of common of thematic concerns, including business investment and closer commercial engagement between the two countries.

This platform of confidence served as a catalyst for a range of South African companies to venture into critical sectors of the Nigerian economy: Standard Bank group trading as STANBIC IBTC in banking; Group5 and LTA Construction in construction; Shoprite and Pep Stores in retail; Sun International and the Protea Group in hotel and tourism; SASOL in the oil industry; Multichoice in cable television; Umgeni water in water provision; and ESKOM and Power Giant in electricity generation and renewables.

However, we reserve pride of place for MTN and its pioneering contribution to Nigeria’s embryonic telecoms industry; and it is precisely this contribution which has become a cause célébre in the news where MTN has been subject to egregious punitive measures by Nigerian authorities, mostly on very spurious grounds. MTN has essentially become a victim of its own success by adroitly negotiating its way through a very difficult, unforgiving, and corrupt business environment, compounded by a weak rule of law culture and an ineffective regulatory apparatus.

MTN was founded in 1994, and currently has revenue of $15.5 billion, total assets of $14 billion, total equity of $13 billion, and more than 230 million subscribers spread across countries in Africa, Europe, and the Middle East. While this spread represents over 20 countries, MTN Nigeria contributes one third (24%) of revenue  to MTN group.

And in terms of the business opportunity that stemmed from South Africa’s close bilateral ties with Nigeria, MTN was the first to make substantial green-field investments in order to bring accessible and affordable mobile telephony to the majority of the Nigerian population who otherwise would not have been able to afford it.

The deficient and dysfunctional infrastructure in Nigeria meant that MTN had to build and develop the necessary fibre-optic and receptor networks using foreign exchange. To date, MTN has rolled out more than 8500km fibre-optic cables with 7000 base transceiver stations across the country. It further sought to establish a strong Nigerian identity by building local partnerships across Nigeria’s six geo-political zones. This was complemented by ensuring that its corporate profile represented Nigerians: it has 2200 Nigerian citizens as permanent employees; 349 in senior management positions; and 70% of its Executive Management Committee is made up of Nigerians. As part of its social responsibility ethos, the MTN Foundation has invested more than R285 million in 20 projects and rolled these out in 292 project sites across 36 Nigerian states. Up to about 2014, MTN has paid the Nigerian government more than R35 billion in taxes and levies.

It is against this background that there is so much consternation in South Africa and elsewhere about why MTN has been singled out for harsh punitive measures. It must be emphasised that had MTN been a European or American company, the Nigerian authorities would have thought hard and long about their actions. In fact, how has Royal Dutch Shell escaped after turning oil exploration in the Niger Delta into an apocalyptic wasteland?

It is clear that MTN has become a soft target to compensate for the fiscal decrepitude of the Nigerian government and its associated public revenue calamaties.  Starting in 2015, MTN was fined $5.2 billion (about R78 billion at current prices) for failing to meet the deadline for disconnecting 5.2 million subscribers who were not properly registered. With some diplomatic assistance from the SA government, the fine was reduced to $3.2 billion (about R48 billion). However, MTN’s share price plunged 47% as a result.

The next woes for MTN came from Nigeria’s Central Bank that it pay back $8.1 billion (about R123 billion) in dividends which were ‘illegally repatriated’ and that this amount be paid directly to the Central Bank itself. It has been reported that this severe action relates to the dramatic decline of its currency, the Naira, by more than 45% against the Dollar over the last three years. The situation has been exacerbated by the forthcoming elections in February 2019 and a chronic shortage of foreign exchange to pay for them. Meanwhile, MTN has decided that it will seek relief from Nigeria’s Federal High Court against the Central Bank’s injunction.

And it does not stop there: Nigeria’s Attorney General is further demanding that MTN pay $2 billion (about R30 billion) in unpaid taxes that it alleged owes on foreign imports. A major consequence of this manifestly unfair treatment is that MTN faces the prospect of a ratings review by Moody’s.

The spectre of doing business in Nigeria is bound to haunt other South African companies since they will also be fair game as Nigeria seeks to use its own institutional and regulatory weaknesses to extract rents for its stressed fiscus. Such behaviour by a Crippled Giant should therefore come as no surprise.

Dr Garth le Pere teaches at the University of Pretoria

Garth le Pere

is the founder and former Director (1994-2010) of the Institute for Global Dialogue and Senior Partner, DAJO Associates. He teaches at the University of Pretoria’s master course in Diplomatic Studies for senior officials in South Africa’s Department of International Relations and Cooperation. He is the author and editor of numerous books and reports on South Africa’s foreign policy, South-South relations and China’s role in Africa. He consults regularly for the South African government on foreign policy issues.

MTN IN NIGERIA: A POISONED CHALICE?