October 5, 2018 / 10:24 AM / 16 days ago

Nigeria's central bank files counter claim in escalating MTN dispute

ABUJA (Reuters) - MTN’s dispute with Nigeria’s central bank looked set to drag on, after court documents showed the bank was persisting with its demand that the South African telecoms firm repatriates $8.1 billion.

Nigeria’s central bank filed a counter claim to a court request by MTN which sought to stop the bank from forcing it to bring back the money, the company’s lawyer said on Friday.

In asking a Lagos court to throw out MTN’s case, the central bank also requested the firm pay 15 percent annual interest on the $8.1 billion, according to court documents seen by Reuters.

The move escalates a dispute between MTN and the monetary authority in a market which accounts for a third of its annual core profit.

The Central Bank of Nigeria (CBN) on Aug. 29 ordered MTN and its lenders to bring back to the country the funds which it alleged the company had sent abroad in breach of foreign exchange regulations.

“The improper depletion of our foreign reserves is a more serious problem for the entire country far above the claims of the Plaintiff (MTN) in its application,” the central bank’s lawyers argued in the document.

Nigeria has been battling to defend its currency and also shore up its reserves of around $44 billion, hobbled by lower oil prices.

“MTN had gone to court, sued the central bank and the attorney general. The central bank has filed a response and a counter claim, meaning that nobody can resort to self-help in the matter any longer,” MTN’s lawyer, Wole Olanipekun, told Reuters.

“With this development everybody has now surrendered ... the grievances to the court. Everybody has to wait for the decision of the court.”

MTN’s next move will be to file a reply to the bank’s claim, he added.

CBN’s spokesman Isaac Okorafor said the central bank “is aggressively engaging MTN and the banks, but he added “I’m hopeful that an amicable resolution will soon be achieved”.

Shares in MTN were trading 4 percent down by 1250 GMT, having earlier fallen as much as 8.5 percent to 79.85 rand, their lowest level since Sept. 21. They were the worst performer in the Johannesburg stock exchange’s top 40 index.

“The market is seeing that (the central bank’s move) as going back to that aggressive stance they had right at the beginning,” said Greg Davies, equities trader at Cratos Capital.

MTN has lost 35.3 billion rand ($2.40 bln), or 17.4 percent, of its market value since the claim was announced.

“SYSTEMICALLY IMPORTANT”

The telecoms firm is also facing a $2 billion tax bill from Nigeria’s attorney general, the demand for which MTN has also asked the court to halt to protect its assets in the country. Olanipekun said MTN has received no response from the attorney general yet.

Central Bank Governor Godwin Emefiele has said MTN is “systemically important” to Nigeria, the company’s biggest market, adding that the firm and its lenders have written to the bank and provided documents supporting that view.

MTN’s most recent troubles come about two years after it agreed to pay more than $1 billion to settle a dispute over SIM cards in Nigeria - a country whose finances have been hit by a weak economy and volatile global oil prices.

The latest alleged infraction, related to the fund transfer, was that the telecoms firm did not obtain final approval before moving the naira equivalent of $8.1 billion from its profits out of Nigeria, the central bank has said.

MTN’s lenders; Standard Chartered, Stanbic IBTC Bank, Citibank and Diamond Bank were also fined in connection to the money transfer.

The central bank’s lawyer said in the court documents that the $8.1 billion MTN transferred out of Nigeria was purchased improperly from the bank and that the amount forms a large portion of the country’s total foreign reserves.

Nigeria’s reserves have come under pressure this year as foreign investors exit the country in response to rising interest rates in the United States.

Additional reporting by Tiisetso Motsoeneng and Tanisha Heiberg in Johannesburg and Alexis Akwagyiram in Lagos; Editing by Emelia Sithole-Matarise and Elaine Hardcastle

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