Nigeria MTN is tightening rules against
investors in a move analysts say is evidence of a government struggling
to cope with fiscal pressures in the face of plunging oil prices,
creating more unpredictability for Africa’s biggest economy.
In the same week, regulators also imposed fines on Standard Bank Group’s Nigerian unit, United Bank for Africa and First Bank of Nigeria.
"It’s worrying, the bank fines, the telecommunication fines," Clement Nwankwo, executive director of the Policy and Legal Advocacy Centre, says in Abuja, the capital.
"I don’t get the sense of what the economic direction is. If Nigeria is broke and agencies are fining companies to make up for the shortfall in oil revenues, then that is something that we should be worried about," he says.
Nigeria has no finance minister or clear economic policy, five months after President Muhammadu Buhari took office on pledges to combat corruption, end an insurgency by Boko Haram militants and bolster the economy.
He has had to do that with dwindling resources after oil prices fell 55% since June last year. Nigeria is Africa’s biggest crude producer, with oil making up more than two-thirds of government income.
"The fiscal headwinds facing Nigeria have resulted in an
increasingly assertive regulatory regime in Nigeria," Martyn Davies, MD
of emerging markets
and Africa at Deloitte in Johannesburg, says. "The fiscal pressures are
resulting in greater pressure on firms, local but particularly
multinational, to comply."
Gross government revenue fell 57% to 435-billion naira ($2.2bn) in June from a year ago, according to data from the central bank.
Revenue in the first six months of this year was 3-trillion naira compared with 4.8-trillion naira in the same period last year.
MTN shares have slumped 22% since October 26, when the firm said it was facing a fine.
The stock rose 0.6% to R148.99 at midday in Johannesburg after MTN said the Nigeria Communications Commission renewed its operating licence.
Tony Ojobo, a spokesman for the commission, said last Thursday investors were required to comply with the rules or face penalties. On Monday, he said there was no update to be disclosed on the MTN fine.
Femi Adesina, a spokesman for Mr Buhari, says the MTN penalty is not a matter for the Nigerian presidency, referring queries to the NCC.
The penalties signal "that the new government is serious about compliance, which, over the medium term, should be beneficial for business", Cobus de Hart, an analyst at NKC Independent Economists, says.
"However, given the understandably fickle investor sentiment currently in the country, being too strict too quickly will adversely affect the business environment and investors may become even more anxious."
Slowly, investor confidence has eroded this year.
In September, JPMorgan Chase said it would remove Nigeria from its emerging-market bond indices, because foreign-exchange restrictions imposed by the central bank to help stabilise the naira and reserves had caused liquidity to dry up.
Mr Buhari has backed the central bank’s currency controls even though they are hurting importers and growth in an economy that expanded at the slowest pace this decade, at 2.4%, in the second quarter.
He is yet to disclose the portfolios of his 36 cabinet nominees, who were all approved by the Senate during confirmation hearings last week.
"Certainly, it is important that the regulatory agencies are active and taking action against companies that violate the rules of business," Mr Nwankwo says. "But it is always useful that this be done in the context of a national economic policy."
Bloomberg
MTN
was fined $5.2bn by Nigeria’s telecommunications regulator last week,
more than 20% of the mobile phone company’s market value, for failing to
comply with an order to disconnect customers with unregistered phone
cards.
In the same week, regulators also imposed fines on Standard Bank Group’s Nigerian unit, United Bank for Africa and First Bank of Nigeria.
"It’s worrying, the bank fines, the telecommunication fines," Clement Nwankwo, executive director of the Policy and Legal Advocacy Centre, says in Abuja, the capital.
"I don’t get the sense of what the economic direction is. If Nigeria is broke and agencies are fining companies to make up for the shortfall in oil revenues, then that is something that we should be worried about," he says.
Nigeria has no finance minister or clear economic policy, five months after President Muhammadu Buhari took office on pledges to combat corruption, end an insurgency by Boko Haram militants and bolster the economy.
He has had to do that with dwindling resources after oil prices fell 55% since June last year. Nigeria is Africa’s biggest crude producer, with oil making up more than two-thirds of government income.
Gross government revenue fell 57% to 435-billion naira ($2.2bn) in June from a year ago, according to data from the central bank.
Revenue in the first six months of this year was 3-trillion naira compared with 4.8-trillion naira in the same period last year.
MTN shares have slumped 22% since October 26, when the firm said it was facing a fine.
The stock rose 0.6% to R148.99 at midday in Johannesburg after MTN said the Nigeria Communications Commission renewed its operating licence.
Tony Ojobo, a spokesman for the commission, said last Thursday investors were required to comply with the rules or face penalties. On Monday, he said there was no update to be disclosed on the MTN fine.
Femi Adesina, a spokesman for Mr Buhari, says the MTN penalty is not a matter for the Nigerian presidency, referring queries to the NCC.
The penalties signal "that the new government is serious about compliance, which, over the medium term, should be beneficial for business", Cobus de Hart, an analyst at NKC Independent Economists, says.
"However, given the understandably fickle investor sentiment currently in the country, being too strict too quickly will adversely affect the business environment and investors may become even more anxious."
Slowly, investor confidence has eroded this year.
In September, JPMorgan Chase said it would remove Nigeria from its emerging-market bond indices, because foreign-exchange restrictions imposed by the central bank to help stabilise the naira and reserves had caused liquidity to dry up.
Mr Buhari has backed the central bank’s currency controls even though they are hurting importers and growth in an economy that expanded at the slowest pace this decade, at 2.4%, in the second quarter.
He is yet to disclose the portfolios of his 36 cabinet nominees, who were all approved by the Senate during confirmation hearings last week.
"Certainly, it is important that the regulatory agencies are active and taking action against companies that violate the rules of business," Mr Nwankwo says. "But it is always useful that this be done in the context of a national economic policy."
Bloomberg
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