With less than three months into the end of the year, the prospects of getting MTN Nigeria and other blue-chip companies listed on the Stock Exchange seems impossible, no thanks to a number of factors bordering on the superficial to the complex. Ibrahim Apekhade Yusuf and Al-amin Ibrahim examine the issues
Lull is the word to describe the persistent inaction being experienced at the nation’s bourse. The reason is not far to seek: things are not moving at a fast pace much to the chagrin of economic watchers. In a manner of speaking, everything seems to be on a reverse mode!
The capital market was upbeat last year following moves by some blue chip companies including MTN Nigeria to come into the market. But this seems not feasible anymore, at least this year.
The MTN Nigeria saga
Until few months away, MTN Nigeria looked good to get listed but that assurance has fizzled away.
How it all began
In 2015, the Nigerian subsidiary of MTN was fined by the Federal Government of Nigeria through the Nigerian Communications Commission (NCC) for not meeting the deadline set up by the Mobile network operators (MNOs) for disconnecting over the Subscribers Identification Modules (SIM) with improper registration.
The Commission exercised section 20(1) of the Telephone Subscribers regulation (TSR) law on MTN, leading to a calculated fine of $5.2 billion, according to the constitution.
The compliance audit carried out by the NCC on MTN network revealed unregistered 5.2 million customers lines were not deactivated as directed. This led to the NCC fining MTN with the sum of $1000 for each unregistered SIM according to the Telephone Subscribers regulation (TSR) law, which amounted to $5.2bn.
What followed was major resignations among the top echelon of the organization including the chief executive officer, Sifiso Dabengwa, the Head of Nigeria Operation, Micheal Ikpoki and the Head of Cooperate Affairs, Akinwale Goodluck being replaced with Phuthuma Nhleko, Ferdi Moolman and Amina Oyegbola as new chairman, managing director and Head of Corporate and Regulation respectively.
The new management employed a diplomatic measure between the government of the Republic of South Africa and its Nigerian counterpart to ameliorate the burden of the liabilities from the fine. This action brought about the reduction of the liability to $3.2 billion.
The fine contributed to MTN’s debt burden, which had risen from R52bn ($4.2bn) in 2016 to R57bN ($4.6bN) in 2017.
In response, MTN, whose headquarters is situated in South Africa, decided to replace its dollar-dominated debts with the local currencies of the countries where its different units are situated.
Beside Nigeria, Ghana is one of the other African countries where MTN had since launched its IPO, which took place on 29 May 2018. The IPO closed on 31 July 2018. A total of up to 4,637,394,533 ordinary shares of MTN Ghana, representing 35% of its equity is being offered to qualifying applicants. This was part of the agreement between MTN Ghana and Ghana’s National Communications Authority (NCA) in November, 2015 for MTN Ghana to deploy 4G LTE mobile services to its customers in Ghana. Among other methods of payments, MTN mobile money was included as a payment option for the MTN share offer subscription. This is the first time mobile money has been used as a payment method in an IPO.
MTN has been criticised for its activities in Iran’s telecommunications sector. MTN has a 49 percent stake in government-controlled MTN Irancell, the second-largest mobile phone operator in Iran, and 21 percent of MTN’s subscriber base is from the country. In January 2012, the US-based advocacy group United Against Nuclear Iran (UANI) launched a campaign publicly calling for MTN to scale back its operations in Iran and end its business in the country. UANI alleges that MTN technology is “enabling the Iranian government to locate and track individual cellphone users which it says is a violation of users’ human rights.”
More trouble for MTN
It is however instructive to note that more trouble arose for the telco when the Central Bank of Nigeria slammed MTN with a whopping bill of $8.1bn last week for repatriating funds offshore along. The crime involved the purchase of forex from the banks; Stanbic-IBTC, Diamond Bank, Standard Chartered Bank, and Citibank to acquire equity (shares) in MTN international (outside the shores of Nigeria), which later came back as forex “inflow” into Nigeria.
The CBN’s probe into the “illegal” repatriation of funds by MTN had lasted just under three years. The CBN is the apex regulator of banks, which facilitated the transfer of funds on behalf of MTN.
The banks that facilitated the breach of the country’s forex rules were also handed a bill of N5.8bn for handing over the customary “Certificate of Capital Importation” or CCI as required.
Checks by The Nation revealed that the CBN is still awaiting the payment of these fines before further action can be taken on the proposed IPO, which insiders hint, may not be resolved anytime soon.
Experts’ views on MTN IPO crisis
In the view of the Deputy Managing Director of Afrinvest West Africa Limited, Victor Ndukauba, said the planned public offer of the MTN can only happen this year if there is a miracle more-or-less.
According to him, the proposed public offer which was set for August 2018, hit a brick wall following controversies surrounding the telco’s tax report.
The Afrinvest boss who gave a bird’s eye view of the botched proposed IPO by MTN said from hindsight most companies planning to list on the Exchange are required to meet certain conditions, which MTN was yet to fulfill at the moment.
“In the case of MTN, the timing for such a transaction often is based on audited account. These are parts of the standing rules around validity of the account. Once an account is older than nine month, it is considered to be stale which is what applies in this case. We are now in October and the last audited account of MTN was last December. So it is already stale. Unless there is a waiver granted and the company seeks a way waiver from the NSE and SEC agrees to waive that requirement it cannot therefore proceed to the IPO in the course of 2018.”
Besides, the timing of course is not very good because presently as we get closer towards the end of the year, businesses are trying to stock up or invest or those who want to do year-end activities are trying to start saving money for some of the activities at the end of the year. The timing may not be right for that kind of business so that is just one consideration the real challenge with the MTN deal was the issues that arouse with the CBN over the irregularities around the repatriation of capitals and how some of that was not properly documented.
Echoing similar sentiments, Mazi Okechukwu Unegbu, lawyer, arbitrator and stockbroker, and currently Managing Director/Chief Executive, Maxifund Investments and Securities Plc, the regulators who hold the levers of the capital market take the blame for the misfortune currently being experienced at the sector.
The former President of the Chartered Institute of Bankers of Nigeria (CIBN), who was unsparing in his criticisms, said the preference for foreign investors by both the Securities and Exchange Commission (SEC) and the Nigeria Stock Exchange (NSE) with scant regard for local investors was responsible for the lull in the sector.
“Our regulators have not done environmental impact assessment. They don’t understand that the Nigerian economy cannot be compared to the UK or the US. So you cannot introduce the rules of engagement in those economies to Nigeria because we are still developing and that is why the economies like Malaysia, Singapore will always come with policies that would help their economy. Here, there is nothing like that. Nobody is thinking about that. What are those incentives or policies that you bring on board to encourage local investors?”
Stocks’ performance nothing to cheer about
The performance of most stocks being traded the Exchange in the last couple of months have been terribly uninspiring judging by the incremental losses thus far.
The bear crush on the Nigerian stock market has brought the total losses so far this year as at close of business last to N1.8 trillion.
Specifically, the Nigerian Stock Exchange, NSE, market capitalisation which represents the total value of all investments in the Exchange, closed at N11.802 trillion down from N13.609 trillion at the close of trading in December 2017.
Market operators have attributed the bearish run experienced in the past couple of month to sustained sell-offs on most of the highly capitalised stocks occasioned by political concerns in the country.
A week-on-week, W-o-W, review of the market showed that at the start of trading some few weeks back, the NSE Index declined by 1.3 percent and the bearish performance was sustained all through with the largest daily loss in the past eight -months recorded last Wednesday (-3.5 percent) as investors sold off highly capitalised stocks in the banking and industrial goods sectors.
Accordingly, the benchmark index fell 5.0 percent W-o-W to 32,327.59 points, while year-to-date, YtD, loss worsened to -15.5 percent. Similarly, investors lost N624.4billion as market capitalisation reduced to N11.8trillion, the lowest level since July 2017.
Reacting to this development, analysts at Afrinvest Research stated: “Since the rout started at the tail end of January, the Nigerian market has lost 27.3 percent, one of the worst performing within this period, globally. With no fundamental driver to boost investor sentiment on the horizon, we believe the current weak performance will persist, although we expect speculative trading to shape activities pending the completion of the general elections in 2019.”
The analysts at Afrinvest added: “Furthermore, technical analysis of the market also makes a case for a rebound in performance in the coming week, with the Relative Strength Index (RSI) currently at 20.5 points – which is in the oversold region.”
Blessed assurance of investor confidence
Meanwhile, the Acting Director-General, Securities and Exchange Commission, Ms. Mary Uduk, speaking on measures being taken to protect investors in the Nigerian capital market during an interview with journalists in Abuja, said in as much as the capital market will like to attract as many companies as possible, the decision to be listed rests with the individual companies.
“All we do is to encourage companies and let them see the benefits of being listed. However, all public companies, whether listed or not, are expected to register their securities with the commission. We also have rules stipulating that shares of public companies can only be transferred on SEC-approved trading platforms/exchanges. Thus, even when a company delists, its shares can still be traded on, say, NASD OTC Plc. In addition, the commission is liaising with the Corporate Affairs Commission to ensure that companies comply with registration of their securities and exchanging such securities only on SEC-approved platforms.”
The SEC boss further emphasised that effort is being made to restore investor confidence in the capital market.