MTN Goodfaith payment

MTN released a statement yesterday which the market responded to in a Goldilocks way. Not the best via the website white labelling: MTN-update on fine imposed and cautionary renewal. In short, the company will make "without prejudice good faith" a payment of 250 million Dollars. At the unicorn rate (the official rate) that is 50 billion Naira, at the street rate i.e the real life rate of 370 Naira to the Dollar, that is equal to 92.5 billion Naira. I swear, you cannot make this up, National newspapers are talking about the parallel rate in Nigeria on their websites: Nigerians Shun Money Transfer Agencies as Exchange Rate Gap Widens, the quote:

"THIS DAY learnt that on advice of friends and family members in the country, Nigerians that live abroad now prefer to send dollar cash and other foreign currencies to the country, so that the beneficiary would be able to convert it at the black market rate at higher value. This, they do by giving the cash to anyone coming into the country to help them deliver to the beneficiaries."

I love the way that the newspaper learnt this. Friends and family taking part in the illicit trade of currency, the shock and horror of it all. What the article does point out is that Nigerians send back home around 21 billion Dollars a year, making it the 6th largest recipient of such diaspora remittances. Wow. To put this number into context, it is around 50 percent more than our entire education budget here in South Africa. If the rate of the Naira were to float freely, what impact would that have on the official inflation rate? And more importantly, what does this mean for MTN? I suspect that prices would adjust. And perhaps the country would get stronger inflows.

Anyhow, for our purposes, what does this actually mean? It means that MTN have accepted that there is likely to be some larger fine, and to appease the authorities and to come to a speedy conclusion, they have paid some money over. I guess this is progress, I suspect however until it is "solved" it will not be and there will still be an overhang of sorts. We continue to hold and monitor the situation, the poor share price underperformance is certainly testing the nerve of the most tenacious and patient "buy and hold" crowd.