The stocks of telecommunication giant, MTN Group took an expected plunge on Thursday, August 29th, a day after Nigeria’s Central Bank ordered it to refund 8.1 billion dollars that it said MTN illegally sent abroad.

The demand by Nigeria’s central bank is the latest setback for MTN in Nigeria.

Nigeria is the telecom company’s most lucrative market but has as well been its biggest headache.

The new sanction is coming just two years after MTN agreed to pay more than $1 billion to end a dispute in Nigeria over unregistered SIM cards.

Nigeria’s central bank said the funds had been illegally moved abroad because the company’s bankers had failed to verify if MTN had met all the foreign exchange regulations.

But MTN denies the allegations.

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To understand how important this is, the money is more than half of MTN’s market capitalisation, and analysts said the demand risked further undermining Nigeria’s efforts to shake off an image as a risky frontier market for international investors.

At around 10 am on Thursday, August 30th, MTN shares were down 21.4% 84.35 rand, after touching 83 rand, a level last seen in 2009.

The crux of the allegation is that MTN used improperly issued certificates to convert shareholders loans in its Nigerian unit to preference shares in 2007.

As a result, dividends paid by MTN Nigeria to the parent company between 2007 and 2015 - amounting to $8.1 billion - are deemed illegal, and should be returned, according to CBN.

“No dividends have been declared or paid by MTN Nigeria other than pursuant to certificates of capital importation issued by our bankers and with the approval of the CBN as required by law,” MTN said in a statement.

“One wonders why this wasn’t brought to MTN’s attention years ago. You just can’t do business in an environment where these types of things are going to happen,” said Greg Davies of boutique investment house Cratos Capital in Johannesburg.

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