In a recent financial stability review, the South African Reserve Bank (SARB) noted that the $10 billion debt which Nigeria claims to be owed by MTN represents a risk to South Africa’s economy.
Based in South Africa, MTN Group has operations across the African continent, and Nigeria is its largest market. Nigerian authorities claim that the group owes $2 billion in back taxes related to its operations in the market over the past decade, along with a further $8.1 billion which they allege was repatriated illegally. MTN has disputed both claims.
SARB’s review noted that: “Any potential impact on the South African financial system arising from this event will depend on the eventual resolution of the matters raised and MTN Group’s ability to continue meeting its debt obligations, including those in the South African banking sector.”
“Given the globally interconnected nature of the South African financial system, this could increase systemic risk. A potential worst-case scenario would be for the MTN Group to disinvest from Nigeria as a result of this event, which, ceteris paribus, would increase the MTN Group’s exposure level to reputational risk”, concluded SARB.
Nigeria was a high-performing market for MTN in its most recent quarterly earnings report, and it reaffirmed its plans to put MTN Nigeria up for an IPO despite the country’s Central Bank calling for the group to pay interest on the $8.1 billion.
