Nigeria Slaps MTN with 5 Billion Dollar Fine

In this episode of AfricanPod, Muhammadu Buhari’s government in Nigeria has a strong message for multinational companies, and it is this: a government’s regulatory power can always be exercised to ensure multinational companies remain at par with the law, and not above it.  

A multi-national Telecommunications giant in Nigeria MTN, has been slapped with a fine of more than five billion dollars by the Nigerian government. Yes, that is billion with a “B.”

“B,” as in “bravo.Logo.cdr 2

The fine is a record-breaking punishment for MTN, one of the largest and powerful telecommunications company in Africa, operating in countries including Benin, Botswana, Cameroon, Ghana, Ivory Coast and South Africa. The company’s services are also available in some parts of the Middle East.

Just last month, MTN was judged as the Most Admired and the Most Valuable African brand.

But that brand is now under pressure over the huge fine. The immediate fallout from the fine is the resignation of the company’s Chief Executive Officer, Sifiso Dabengwa. This is in addition to the company’s share price on the Johanesburg Stock Exchange taking a dive, leading to temporary suspension of trading.

Also, the Johannesburg Stock Exchage appears to take a dim view of suspicions that MTN failed to notify the Exchange in a timely fashion after it learned about the historic fine from the Nigerian government.

MTN’s offence, according to Nigeria, was simple, and spelled out as “failing to deactivate 5.2-million unregistered SIM cards (active) on its network.”

But it goes deeper than that, as it is believed that the Nigerian government imposed the hefty fine after the kidnapping of a former finance minister, Chief Olu Falae.

You guessed it: the kidnappers used a phone on MTN network to demand a ransom. And the trouble is, the Sim Card was unregistered, making it impossible to track down the owners – or possibly, the kidnappers.

The 5.1 billion dollar fine is a colossal amount of money, representing more than 20% of Nigeria’s annual budget and twice the MTN annual group profits.

Let’s say at the very worst, MTN will recover from the 5.1 billion dollar fine, but most certainly not so fast. Already, the company is trying to negotiate with the Nigerian Authorities to reduce the fine.

Sure, if the Nigerian government is able to recoup the entire five billion dollars, well, it would be pretty good for its budget.

But the boosting of its annual budget is not likely the reason why the Nigerian government slapped the fine on MTN.

It is very likely a reflection of Nigerian leader Muhammadu Buhari’s renewed effort to bring order to Nigeria, restore respectability and deal with deeply entrenched penchant for breaking rules.

President Buhari is a retired Army Major General and was military Head of State from late 1983 to August 1985. He was no democrat at the time.

However, having passed the age of 70 and calculating that he had nothing to lose but a better legacy to leave, he made an unlikely run for the Presidency which he won and was sworn into office in the first half of 2015.

He has since stamped his authority on Nigeria, openly declaring that no longer will anyone be allowed to flout rules without consequence, and that includes multi-national companies.

So MTN is experiencing life in President Buhari’s new Nigeria, at the cost of more than five billion dollars.

Of course, time will tell how truly revolutionary the new Nigeria under Buhari will turn out to be.

But for now, MTN and other mobile phone telecommunications providers will take seriously the Nigerian government directive that all sim cards must be registered to their owners – or disconnect service to existing sims cards that are still unregistered.

MTN was careful to stress that the resignation of their Chief Executive Officer was an “an honourable” gesture and did not mean that Sifiso Dabengwa was at fault for the unregistered SIM card debacle in Nigeria.

In a new globalised world where many multinational companies are richer and often more powerful than many sovereign nations, the Nigeria versus MTN development is an interesting one that draws attention to the actions of other conglomerates including Germany’s Volkswagen car company and BP.

BP was held responsible for the historic Gulf of Mexico Oil spill five years ago while Volkswagen was caught cheating on emissions test – the so called global Diesel Deception.

Multinational companies do some good, including employing millions of people, but their reach and power sometimes get in the way, making it necessary for regulatory authorities, even in small and weak countries to show some teeth.

On this occasion, the Nigerian government appears to be calling the shots in imposing a hefty fine on MTN as an example that can be easily referenced in Africa.

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