The Explosive MTN Nigeria Fine And How It Affects You

share on:

I like looking at numbers, they excite me, because numbers don’t lie. But back to the topic at hand…

MTN was fined approximately $5.2 billion for failing to disconnect customers with unregistered SIM cards, you can read about that here.

The Nigerian Communications Commission basically fined MTN about $1,000 per unregistered user which covers about 5 million unregistered SIM cards. But here is where the number starts getting interesting…

Nigeria’s 2015 budget proposal submitted to the Senate in December of 2014 has an aggregate revenue of N3.602 trillion. Which is made up of oil revenue of N1.918 trillion and non-oil revenues of N1.684 trillion according to PWC.

In US dollars, that will be an estimated oil revenue in 2015 of $9.5 billion, while the non-oil revenue estimates (Primarily made up of taxes) will be approximately $8.5 billion.

Now, the MTN fine of $5.2 billion (if it stands) is already 60% of our expected non-oil revenue for the year! And is approximately 30% of the expected entire 2015 Nigerian revenue.

And according to bloomberg.com the MTN fine “would exceed the revenue the Nigerian government made from oil in the second-quarter [of 2015], and be more than double the state’s non-crude proceeds.”

MTN fine

So what does all this mean?

The Nigerian government is looking for ways to increase it non-oil revenue amount and MTN is its first victim.

But this is not the end … the government looks to be poised to audit more aggressively Nigerian business accounts to find tax evaders and other violators and bring them to book. And if the MTN example is anything to go buy, they will not be lenient with their fines.

So what is the impact?

If the government is overtly aggressive in its tax evaders hunt, it might have the effect of scaring foreign investors away from Nigeria. The MTN fine is a prime example! Their fine per bloomberg.com is already 50% of their total estimated 2015 revenue of $10.7 billion dollars. If they pay the fine, they will struggle to pay staff or would need to take a loan to stay afloat, and their stock price would drop (South African stock exchange suspends trading in MTN shares). Either way it is a bad bad situation for MTN

And other foreign companies might be wary about investing in Nigeria (remember we have already been kicked off the JP Morgan emerging markets bond indexes).

However, if the government shows some flexibility in the fine and lowers it considerably, it could send a message that the Nigerian government means business without scaring investors away. Either way it is a balancing act better left to financial experts.

And the sooner we get our finance minister and his or her team in place, the better.

-1x-1

And for Nigerians like myself with small businesses, you need to start auditing your accounts now … because we are next.

The government desperately needs money and taxes as I talked about in this ofilispeaks.com article written in July is how they are going to get it.

FYI: Did you know that once you register a business you have to remit VAT to the FIRS monthly and even though you have no VAT to record you still have to document that to the government. Failure to do so will cost you N5,000 for every month from the date of your incorporation. So if you registered your business in January of 2000 but have not paid VAT till date, you owe the government N895,000!

So yes foreign investors might be the buzz right now … but we Nigerians are next … especially small Nigerian businesses.

twitterWritten and Researched by Okechukwu Ofili of ofilispeaks.com
Follow him on Twitter
Stalk him on Instagram
Read his crazy titled books on konga or okadabooks
Feed his children at…no wait he has no kids…

Ofilispeaks

Ofilispeaks

Okechukwu Ofili is the author of 3.5 books and writes political satire for the BBC/RNW What's Up Africa show. He is also the founder of okadabooks.com and blogs daily at ofilispeaks.com.

17 comments

  1. How much did MTN pay you for this analysis. In other developed clime, no reasonable person will encourage a regulator to negotiate penalty for infraction they were privy to.

    I’m sure neither NCC nor presidency will listen to this trash.

  2. MTN must pay. They made money from those lines. This kind of analysis should focus on what MTN benefit from their action too. Imagine 100.00 per line for 5million lines per day multiply by number of months, then you ll see that MTN must pay

    1. Yes they should pay but this your 100 naira breakdown. Are you sure it can be calculated that way. I think $5.2bn is a bit too much high though. Whichever way you look at it the message from foreigners will be different from Nigerian’s especially since PMB has been advertising Nigeria as ‘broke’. Go figure.

      1. Nigerians, when are we going to be fair and objective to issues devoid of primordial sentiments. MTN is a signatory to the regulatory rule yet they flouted in their usual manner and you want to hold brief for them. If tomorrow Airtel,Glo or Etisalat flout the same rule NCC and FG will negotiate, that is anarchy. What is the basis of your flexibility?, you arrest an economic and security offender you negotiate, what is the purpose of the law and punishment?
        You and the writer can be sponsored by MTN Nigeria to advocate for lighter penalty goodluck, the government in place today in Nigeria plays by the rule.

        1. The Nigerian government will negotiate, they will come up with a payment plan or some sort of reduced fine.

          A fine should punish a company but not destroy them. If MTN goes out of business Nigeria will lose jobs. Not everything situation is a black and white situation.

          If your child misbehaves, you flog him just enough so he does not do it again, but you don’t flog him to death.

          All I am saying is that the FG should not flog MTN all at once, maybe spread the lashes over a period of time, or reduce the number of lashes they get. But don’t flog them to death or other children will hear and run away. THE END.

          1. Your analogy is misplaced and lacks direct relationship to the the issue. This is not a family or moral matter but law. Please close this matter and report back to MTN, its bad business

          2. No point arguing. I have already told you … MTN and FG will negotiate a payment plan and a reduced fine.

            Our federal government is not stupid to put MTN in such a situation where MTN pull out and Nigeria loses jobs as well as tax revenue.

          3. Even the new Communications Minister alluded to the amount of money that can be made from the Communication sector. Meanwhile you guys are thinking it is all about taking a huge sum at once, we need foresight to move Nigeria forward not this prejudiced thinking or holier than thou attitude we portray. The same NCC couldn’t complete subscriber registration with the 6bn they were given. They pushed the work to the operators and nobody seems to be saying anything about that.

  3. Youre wrong, we have the largest pouplation in Africa and a lot of natural resources, any company willing to play by the books need not be scared of investing here.

    1. I’m impressed by the comments so far, Nigerians can no longer be fooled by agents of SA companies operating in Nigeria. Nigeria is a credible investors delight because we have the critical indices for good ROI. MTN dare not flout laws of smaller countries where they operate. Change has come to Nigeria, institutions and individuals must embrace it. This penalty should send signal to potential deviants across the entire economy. Honorable Minister, Shittu, this is a litmus test in your anti-corruption posture.
      Congratulations Nigeria.

      1. Can anyone enlighten me on why MTN is quoted in SA stock but not in Nigeria? Why is MTN a preferential shareholding in Nigeria? Regarding the myth about foreign investors, I will keep quite.

        1. MTN is a South African company. MTN Nigeria leveraged the goodwill of its founding chairman Dr.Paschal Dozie and several other wealthy Nigerians to leapfrog its business. It took advantage of weak regulatory and enforcement framework at the inception of GSM to reap Nigerians. Today, our consumer awareness is high, a new sheriff is in town and no more business as usual.

          Nigeria must get it right, unnecessary waivers is fraught with corruption and should be checked. What they practice here they dare not try in their host country. If we do not protect and support our public institutions the multinationals will connive with few unscrupulous individuals to abuse and undermine them.

  4. everyone is entitled to their own opinion.

    Going through this analysis neutrally, and I kind of see the point of the writer. But going by the comments it definitely is not easy getting this bunch to see it that way. Flexibility should indeed be considered, even the writer is not asking for a total write-off.

    1. Feel free to fling the book … you won’t be the first.

      And please note that I don’t write to appease readers of my book or the government or organizations. I write what I feel is the truth.

Leave a Reply