Forbes take on The Curious Case of MTN's Whopping $5bn Fine In Nigeria

Toby Shapshak ,

Contributor

Against the backdrop of a massive China-Africa trade summit, there is the curious case playing out of South African cellular network MTN’s whopping $5.2-billion fine in Nigeria, the emerging market mobile giant’s biggest region.
The extraordinary fine was imposed in October by the Nigerian Communications Commission (NCC) for not disconnecting some 5.1-million SIM cards during a registration process in 2013. Each SIM card was fined 200,000 naira ($1,000), totalling N1.04-trillion or $5.2-billion.
The excessive amount of the fine (37% of MTN’s total revenue and more than double the group’s annual profits) has been the source of innumerable conspiracy theories and much market speculation. Some arguments have been advanced that the weaker oil price (Nigeria is large oil exporter) has forced the new government of recently elected President Muhammadu Buhari to find alternative sources of income.
MTN has lost about 25% of its market value since the scandal broke six weeks ago. On Thursday the company was valued at about $17-billion (ZAR258-billion) after its share price dipped 4.61% on the day.

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On Friday, the corruption-busting Buhari is expected to meet his South African counterpart, Jacob Zuma, on the sidelines of the Forum on China-Africa Cooperation, or Focac, event in Johannesburg, which is being held in Africa for the first time in its 14-year history.

Lagos skyline. Photograph: Toby Shapshak

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Nigeria is Africa’s most populous country with 150-million people, while its economy last year overtook South Africa’s as the continent’s largest. China is rapidly becoming Africa’s largest trading partner; while South Africa and Nigeria do a political dance to assert themselves as the continent’s leading power.
Many analysts see the financially crippling fine as a way for Nigeria to assert its dominance over a South African company, with one calling it a “state-sanctioned mugging”. Others argue that Nigeria’s communication commission is threatening foreign investment with the onerous amount against one of Nigeria’s largest investors, MTN.