Read The Following Article

South Africas MTN is truly an African success story. The telecommunications giant has firmly positioned itself as one of the biggest brands on the continent and the companys Nigerian business, which

employs over 17,000 people, has been in[1]strumental in creating the MTN Group of today. But the company is losing its shine after being heavily pursued by the Nigerian government.

From the $5.2bn fine for failing to disconnect mil[1]lions of unregistered SIM cards later reduced to just under $1bn to the more recent allegations of money laundering levelled at the firm, MTN has had a difficult relationship with Nigerias government. The fallout from this complex situation will be wide-ranging and has the potential to create discontent among investors.At this stage, it is not clear whether the government will review other telecoms companies in Nigeria or indeed companies operating in other sectors. Inves[1]tors will be seeking reassurances from the govern[1]ment about its future intentions. This will require the government to be transparent with the industry and investors about its future intentions with regards to applying the law and fines, says Iqbal Bedi, principal at telecommunications consulting firm Analysys Mason. Political motivation? Doing business in Nigeria can be difficult. The World Banks Doing Business 2017 report ranks Nigeria 169^th out of 190 countries, up slightly from 170th in 2016, showing the damage caused by the lack of business[1]friendly policies enacted by consecutive adminis[1]trations. With the increasingly difficult operating environment for companies, paired with Nigerias economic slowdown, now is not a good time to un[1]dermine business confidence.

Major international corporations with large bank accounts must be beginning to wonder how far these

cases are politically motivated, says Matthew Bey, an analyst at geopolitical intelligence firm Stratfor.

Both the MTN fine and the more recent oil export lawsuits were discussed in the National Assembly

creating more uncertainty and raising questions about how much was political. The Buhari administration is under considerable financial stress and can be expected

to aggressively seek other means of financial settlement [1]ments to help out with its financial situation, says Bey. Substantial foreign investment in Nigeria is required to bolster the faltering economic growth rate, with the impact of continuing economic unrest being felt across the country. Weak foreign exchange reserves and an absence of dollars at a local level are making it hard for businesses of all sizes to operate, with this situation not expected to change anytime soon.Real interest rates have fallen into negative territory as inflation has spiraled and the central bank has not raised rates sufficiently to keep them in positive terri[1]tory and the government has publicly called for rates

to be cut, says Daniel Richards, sub-Saharan Africa analyst at BMI Research. These policy missteps have seen Standard & Poors

downgrade Nigeria to junk status, meaning many international funds will no longer be able to invest in

the country.MTN is not the only business whose financial deal[1]ings have been scrutinized by the Nigerian authorities, with the Buhari administration suing several major oil firms for allegedly exporting over $12bn worth of oil to the US illegally. These cases are still before the Federal High Court in Lagos and are part of a drive by the government to curb corruption and refill near[1]empty state funds, although the oil companies are sure to defend their case in court. Of course, while large corporations are massively important to Nigerias economy, small businesses and startups are the backbones of the country. Unless ef[1]forts are also made to remove regulatory barriers that constrain these nascent companies, they will not reach their full potential and contribute to Nigerias diverse business ecosystem

Long-term prospects The fine and reputational damage endured by MTN is considerable, but its highly unlikely that the com[1]pany will pull out of Nigeria, which is its single largest market. Although potential investors may think twice before entering Africas most populous country, at least for the time being, they will wait to see how the situation can be resolved. I do not think that the MTN fine or the movement on international oil companies court cases will under[1]mine the long-term growth prospects of the telecom industry from an investment point of view. Many of the drivers for long-term growth are structural in nature, such as urbanization and infrastructure development, says Bey. A report released by the Nigerian Bureau of Sta[1]tistics earlier this year showed that during the first quarter of 2016 the telecoms industry grew by 5% and accounted for almost 9% of GDP, even when the Nigerian economy declined by 0.4% over the same period. Initiatives like the National Broadband Plan, which sets a target of 30% broadband penetration by 2018, will help to further lift the prospects of Nigerias telecoms industry. Nigerias government clearly wanted to send a message to potential investors to play by the rules and show there is no room for any errors in the busi[1]ness operations of multinationals. However, the way the government approaches suspected rule-breaking should always be in keeping with the laws and regu[1]lations in place, while also not unnecessarily drawing out the arbitration process. The Nigerian Communications Commissions handling of MTNs fine made tough circumstances even worse. It revised the fine a number of times, at one point making a $500m error that it subsequently blamed on a typo. Venture capitalists and foreign financiers cannot stand uncertainty, so the high level of volatility surrounding MTN and the potential for future investigations by Nigerias government can only be expected to dampen investor appetite going forward. I think what we will continue to see is a very slow evolving picture of what looks like stunted policy in the sense that sometimes it errs on the side of pre[1]serving domestic interests through fines and related soft-expropriation moves, but other times it errs on trying to appease multinationals. Its difficult to imag[1]ine a scenario where Nigeria can go strongly in either direction, concludes Bey

Read the article MTNs Nigeria troubles, and answer the questions based on the article, the concepts gleaned from the book section on Globalization, and the commentary that accompanies each question.

Question A:

MTN is today the 8th largest mobile telephone company operator in the world and the largest in Africa. At the time of the publication of this news piece (December 2016), MTN had the largest number of mobile telephone subscribers in Nigeria. Upon reading the article answer the following questions:

i) What benefits were brought to Nigeria by MTN? Discuss briefly with a tangible example.

ii) Why was Nigeria such a lucrative market for MTN?