CBN ‘probed MTN, banks for 30 months’

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The Central Bank of Nigeria (CBN) decided to punish MTN Nigeria and four banks for forex infractions after a painstaking investigation spanning 30 months, CBN Governor Godwin Emefiele has said.

Emefiele, who spoke in China, said he wanted to clear the air because the matter and the offences committed by the entities concerned were very weighty and had attracted global attention.

He said the total amount to be repatriated by the banks and MTN stands at $8.14billion, adding that when the payment is received, the CBN would credit the company with the naira equivalent at the exchange rate at which the transactions were consummated.

The CBN governor said “It is important to stress that the CBN examiners had been investigating three charges of infractions against the four banks and MTN, particularly the manner of funding the equity investment into MTN and the subsequent capital repatriation that resulted thereafter.”

Emefiele told Busiess Day, as quoted by online medium, The Will, that “the investigation was in two parts, the first allegation started about two and a half years ago, when examiners began to investigate;

The method of payment for shares by local shareholders in MTN International, which is the sole owner of MTN Nigeria.

Whether the banks breached the extant regulations requiring banks to issue CCIs within 24 hours of receipt of funds inflowed into Nigeria.

On the 1st charge regarding investment by local shareholders, the CBN examiners discovered that the local investors, purchased forex from the Nigerian foreign exchange market, repatriated the funds and these funds formed part of the total funds inflowed by MTN totaling $402m between 2001 and 2003. By the extant regulation, only funds inflowed into Nigeria qualify for the issuance of CCI. However, examiners observed that the extant forex regulations at the time of investment allowed Nigerians to purchase shares with foreign currency. So, whereas you would say that the investment of the local shareholders should be voided because the funds came from within Nigeria and were round tripped, you can also say that it is allowed because Nigerians were allowed to invest in foreign currency assets. So we reasoned that since this transaction happened over 10 years ago and the company was doing well, we should grant them a waiver.

On the Second offence regarding the CCIs, the regulation provides that banks must issue CCIs for inflowed funds within 24 hours. The examiners reported that the banks failed to issue some of the CCIs within 24 hours; which is sanctionable. Again the CBN decided to overlook this offence given that these transactions took place over 10 years ago.

It was based on these facts that the CBN wrote the letter dated February 22, 2017 granting MTN the permission to continue paying dividends on the CCIs. So when our Directors were summoned by the Senate to provide the CBN perspective, they told the Senate that the CBN had pardoned the offences and based on this, the Senate towed the same line with the CBN and cleared MTN and the banks of the issues.

Now the third offence, which is actually the crux of the matter in dispute now relates to the unauthorized conversion of a loan of $399 million to preference shares by the MTN and the banks and thereafter repatriated the sum of $8.1 billion without CBN final approval.

The facts from the last examination which commenced in March 2018 is that, at the inception of the company, the shareholders inflowed the sum of $402million and reported that $343million was equity and $59 million as loan. The examiners later discovered that in its 2007 audited accounts MTN’s auditors reported that the investment of $402million was stated as $2.99million in equity and $399m as loan, a statement that is in conflict with their earlier disclosure and on the basis of which CCIs had long been issued to the company. Soon after, the company, through its bankers approached the CBN for the conversion of the loan of $399million to Preference shares. The CBN thereafter gave an Approval in Principle subject to fulfilling certain conditions. Notwithstanding, the Company and the bank went ahead and concluded the conversion to Preference shares without CBN’s final approval and based on this, repatriated the sum of $8.1billion outside the country.

The CBN felt this was too grievous and that this couldn’t be ignored. When the Committee of Governors was informed about this breach, it sounded unbelievable. In order to give the MTN and the banks a fair hearing, a meeting comprising the CBN Committee of Governors, the over 20 Examiners, the MTN officials and the banks was held on May 25,2018. At this meeting, we gave the company the opportunity to defend itself over the breach but unfortunately, it couldn’t. In fact the bank that concluded the conversion, apologized; stating that it was an unintended error. The COG was alarmed that a bank could ignore CBN’s directive requiring final approval before such a huge transaction could be consummated. The COG further directed MTN and the banks to meet with the examiners to provide any evidence within one week that could convince the examiners to change their position. Indeed, the deadline for the submission of documents and evidence was extended to over 12 weeks. Despite granting these extensions, the examiners position never changed, as the Company and the banks had no new evidence to provide. Based on this, the examiners concluded their reports and made their recommendations which was subsequently adopted by the COG.

However, as it stands, letters of sanctions have been sent to all parties. This explanation has become necessary so as to clear certain misconceptions currently circulating in the public domain.

The banks hit by capital importation breach allegations yesterday continued to defend their integrity.

The lenders are also claiming that the transactions in question were approved by the apex bank, which fined them N5.8 billion.

The CBN directed Standard Chartered Bank, Stanbic IBTC Bank, Citi Bank and Diamond Bank to pay N5.8 billion fines and refund alongside MTN $8.1 billion said to have been repatriated illegally. The banks have begun engaging the CBN to state their sides of the story.

The banks allegedly issued irregular Certificates of Capital Importation (CCI) on behalf of some offshore investors of MTN Nigeria Communications Limited. Standard Chartered Bank was fined N2.4 billion, Stanbic IBTC N1.8 billion, Citibank Nigeria N1.2 billion and Diamond Bank N250 million. MTN was directed to refund $8.134 billion to the CBN’s coffers.

The apex bank said its investigation was triggered by “allegations of remittance of foreign exchange with irregular CCI between 2007 and 2015, in “flagrant violation of extant laws and regulations of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006”.

The banks are insisting that the apex bank vetted and approved the transactions. Sources within CBN who are familiar with the development confirmed that the banks and MTN have been engaging key CBN officials to see that the issue is revisited.

“What is important is that the CBN has sent a clear signal to all parties that it cannot be business as usual anymore,” an official said. He added that “even though we are not averse to reviewing the cases, I cannot assure you that the CBN is in any position to review these fines which are the end-result of painstaking investigations.”

MTN has argued that it adhered to all extant laws in the payment of dividends to its shareholders between 2007 and 2015.

It was gathered that in its official response to CBN, Stanbic IBTC described the conclusions reached by the regulator as based on ‘factually incorrect premises’. According to sources privy to the engagements, Stanbic IBTC reminded the CBN of the outcome of its findings on the issue, following a special examination conducted in March. The finding reportedly cleared the bank of any wrongdoing as its actions were in line with extant rules and regulations.

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