MTN will appeal against a decision by Nigerian tax authorities as the group finds itself in yet another dispute in the West African nation, continuing a slide in the group’s share price.
Last week, Bloomberg reported that the Lagos-based Tax Appeal Tribunal (TAT) ordered MTN to pay $72.6m (about R1.4bn), according to documents verified by two government officials.
As MTN Nigeria reported third-quarter earnings on Monday, it said the matter had to do with the TAT’s decision to uphold a principal VAT liability of $47.8m. This pertains to a VAT assessment for the periods covering 2007 and 2010-2017, as issued by the Federal Inland Revenue Service (Firs) to MTN Nigeria.
“Having reviewed this outcome and considering input from tax and legal consultants, MTN Nigeria has resolved to appeal against the decision of the TAT,” said the mobile provider.
MTN shares added to their decline on Monday, falling 5.21% to R95.85 by 3PM. The stock has fallen just less than 9% since news of the TAT decision broke on October 25.
This issue is likely to remind investors of MTN’s run-ins with authorities in Nigeria in recent years. Those did not bode well for its investment case, but they were eventually resolved.
In 2015, MTN was infamously slapped with a $1bn fine by Nigeria’s government for not “deregistering SIM cards” — an administrative bungle that cost then-CEO Sifiso Dabengwa his job. MTN managed to negotiate on the original fine of $5.2bn.
In December 2018, the mobile operator was able to resolve an $8bn fine related to repatriated dividends. A $2bn tax bill was revoked in 2020 after MTN contested it.
The current matter has to do with the latest case from 2020.
In that year, the accountant-general of the Federation of Nigeria (AGF) withdrew from the case and transferred a portion of transactions valued at $1.3bn to the Firs and the balance to the Nigerian Customs Service (NCS) “to resolve the contentious issues”.
MTN says after a series of engagements, the FIRS issued a revised total assessment of $135.7m, representing a principal tax liability of $47.8m, together with interest and penalty of $87.9m.
The group has also had run-ins with Ghanaian authorities where MTN had a R13bn tax dispute at the start of 2023.
This comes as the operator’s largest unit reported service revenue rose 21.4% to 1.8-trillion naira (about R42.76bn) for the quarter to end-September. This was supported by mobile subscribers rising by 2-million, or 4.8%, to 77.6-million.
Earnings before interest, tax, depreciation and amortisation (ebitda) grew 16.3% to 907.9-billion naira while capital expenditure fell 6.9% to 405-billion naira.
The mobile operator also reported a revision of foreign exchange losses following the liberalisation of the naira in June.
MTN Nigeria uses trade lines to fund the establishment of confirmed irrevocable letters of credit for its largely dollar-denominated network investments. The company holds naira-denominated cash cover with banks, to support these facilities.
It said “the significant depreciation of the naira against the US dollar, following liberalisation in June 2023, therefore, gave rise to unrealised forex losses relating to these trade obligations.”
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