Here is How the CBN Sanction May Affect the Long Awaited MTN Listing

September 12, 2018

Here is How the CBN Sanction May Affect the Long Awaited MTN Listing

A year after the MTN Group thought it had been cleared over accusations of taking money illegally out of Nigeria, the issue has resurfaced with perhaps a greater fury.

Recall that the Central Bank of Nigeria (CBN) ordered Africa’s largest wireless carrier to return $8.1 billion it alleged MTN has repatriated illicitly over a period of eight years until 2015. The decision caught the company and its shareholders off guard and the shares plunged, the most in 20 years, the lowest since 2009.

The question however remains; how will it impact the Initial Public Offering (IPO) on the Nigeria Stock Exchange (NSE)? Below are some of the most likely impact:

Derailed Investors’ Confidence

The IPO which has already been delayed following previous sanctions from unregistered sims last year, with the addition of this new sanction will further cause a delay as MTN will shift its focus into battling this present challenge.

According to Bloomberg’s Intelligence analyst, John Davies, the uncertainty is also likely to derail the planned Nigeria initial public offering, as foreign investors will be put off taking part. An immediate concern for investors is that Johannesburg-based MTN won’t be able to repatriate funds out of Nigeria while the dispute is unresolved, meaning the company may have to cut the dividend completely.

“Clearly, there is going to be a, perhaps lengthy, process whereby this issue is resolved.” –Alastair Jones, a London-based analyst at New Street Research.

The request by the Central Bank of Nigeria (CBN) that the MTN Group should refund 8.1 billion dollars illegally repatriated from Nigeria may likely jeopardise the listing of its shares on the Nigerian Stock Exchange (NSE). pic.twitter.com/hfDXFZnmhc

— seriousmata.com (@seriousmatta) September 6, 2018

Negative Market Perception and Speculation

Stocks are highly volatile as prices can change rapidly at any given time. One of such common factors that influence such change is the demand and supply of stocks which is mostly influenced by perception or speculations.

The shares of the MTN Group dropped as much as 23 per cent to a nine-year low (21.4 per cent at 84.35 rands, after touching 83 rands, a level was last seen in 2009), a day after the order Central Bank of Nigeria (CBN). The real challenge is how much will be the value of the stock when it is eventually listed on the floor of the Nigerian Stock Exchange (NSE).

Perhaps with this signs, it might not be the best time for MTN to list on the NSE.

MTN’s $8.1bn refund may jeopardise NSE listing – Experts https://t.co/qGJE1ehbsg pic.twitter.com/irdgz2Zyhc

— Blueprint Newspapers (@Blueprint_ng) September 7, 2018

Regulatory Certainty

The mere fact that there is an impending sanction will slow down the listing process as NSE will want a clean bill from CBN or any other regulatory body before going ahead with the listing. Some sources also have confirmed that the even the Securities and Exchange Commission (SEC), which gives approval for listing on the stock exchange, said some weeks ago that it was yet to receive an application from MTN concerning the proposed exercise.

Among many other factors that may also affect the listing is the present political climate in Nigeria. Political factors that range from relations with other nations to government policies can affect listing as well as share prices. Reports also confirm that the allegations come as Nigeria President Muhammadu Buhari seeks re-election in February 2019. More anti-corruption moves will be initiated to validate the government’s unique selling point.

I have been vindicated with the CBN pronouncement on MTN. When i raised the issue in 2016,i was called all sorts of names. All figures and banks mentioned by me are exactly quoted by CBN. My prayer in that motion is exactly the resolution of CBN. To God be the glory. SDM

— Senator Dino Melaye (@dino_melaye) September 1, 2018

While the listing process is far advanced there needs to be market, investors and regulatory certainty for it to go ahead which of course is not the case here.