* Shares fall as much as 25 percent
* Nigeria says MTN Nigeria illegally paid $8.1 bln to parent
* MTN denies any wrongdoing (Adds analyst comment, updates shares)
JOHANNESBURG, Aug 30 (Reuters) - MTN Group shares plunged as much as 25 percent to a nine year low on Thursday, a day after Nigeria ordered the telecoms group's Lagos-based business to hand over $8.1 billion that the authorities say was illegally sent abroad.
The demand by Nigeria's central bank is the latest setback for MTN in Nigeria, the South African group's most lucrative but increasingly also its most problematic market.
It comes two years after MTN, Africa's biggest telecoms company, agreed to pay more than $1 billion to end a dispute in Nigeria over unregistered SIM cards.
The latest case underlines the risks of MTN's strategy to operate in emerging markets, a move that has made it one of post-apartheid South Africa's biggest commercial success stories, with operations in more than 20 countries.
Nigeria's central bank said the funds had been illegally moved abroad because the company's bankers had failed to verify MTN had met all the foreign exchange regulations.
MTN denies the allegations.
At 1224 GMT, MTN shares were down 21.05 percent at 84.78 rand, after touching 80.61 rand, a level last seen in 2009. The stock is on track for its biggest one-day decline on record.
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.
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, Nigeria alleges.
"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 (Central Bank of Nigeria) as required by law," MTN said in a statement.
The demand from the central bank has raised worries about doing business in Nigeria, whose finances have been hit by a weak economy and volatile oil prices.
"One wonders why this wasn't brought to MTN's attention years ago. You just can't do business in an environment where these type of things are going to happen," said Greg Davies of boutique investment house Cratos Capital in Johannesburg.
The demand also comes ahead of next year's presidential election in Nigeria in which President Muhammadu Buhari, who swept to power on promises of tougher regulations, is seeking re-election.
"This smells like a central bank that is not independent from a government that has big fiscal issues," said Byron Lotter, an analyst at Vestact in Johannesburg. "This is another huge step backwards for Nigeria."
Nigeria's central bank also fined four banks, including Standard Bank's unit in Nigeria, Stanbic IBTC , for their role in moving the money out of Africa's biggest economy.
On Wednesday, the central bank said it had fined Stanbic IBTC 1.8 billion naira ($6 million) for violations of foreign exchange transactions rules and ordered that it return $2.6 billion it repatriated on behalf clients, including MTN.
Standard Bank said in a statement its unit was "not a beneficiary of any of the remittances made on behalf of clients and denies any imputation of malfeasance."
Last November, Nigeria's Senate approved a report largely exonerating MTN following an investigation, after the business was accused of illegally repatriating $14 billion to its parent company.
($1 = 14.6167 rand)
($1 = 305.7000 naira)
(Additional reporting by Patricia Aruo in Johannesburg and Chijioke Ohuocha in Lagos; Editing by James Macharia and Mark Potter)