The story of how Etisalat Nigeria is owing nearly every major bank in Nigeria is a very unfortunate one. This is a country where banks prefer to finance trade over long-term investments. And when they want to invest in technology, they prefer a “well-funded” empire in Etisalat.
Can any Nigerian company receive that type of support? Not possible. The reality is that Etisalat Nigeria may not worth much when compared to the loans it has received and the parent company can just forget its Nigerian subsidiary. In other words, do not expect anyone to pump money into Nigeria to help pay the banks.
The Loan Crises
Despite last week’s intervention by the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN), banks in the country have opposed a proposal by Etisalat Nigeria to convert part of a $1.2 billion loan from dollars to naira and want the Abu Dhabi telecoms group, Etisalat and its other shareholders to recapitalise it instead.
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A banker conversant with the negotiations told Reuters that the seven-year syndicated loan, on which Etisalat Nigeria missed a payment, has a dollar portion of $235 million, which the telecoms operator wants to convert to naira to overcome hard currency shortages on Nigeria’s interbank market.
The UAE’s Etisalat own 45 per cent of Etisalat Nigeria, while Abu Dhabi’s Mubadala owns 40 per cent of the company, which was due to meet its lenders on Thursday for debt talks mediated by the central bank and the telecoms regulator.
However, the 13 banks that syndicated the loan for Etisalat postponed Thursday’s meeting to address the $1.2 billion the telecoms company owes the banks.
The Nigerian problem
Nigeria has been running short of dollars as a result of lower global prices for oil, its major export. Its economy entered a recession last year for the first time in 25 years.
Most of the 13 lenders involved in the Etisalat Nigeria loan had raised dollars abroad to participate, meaning that further naira weakness would see them receive fewer dollars.
The naira has lost half of its value since the loan, which matures in 2020, was made. Interest is due monthly and the next principal payment is due in May, the source said.
Etisalat, which generates 3.7 per cent of its revenues from the Nigerian business, has questioned the rationale of investing more in it and may sell its stake, sources say.
Etisalat had written down the value of Etisalat Nigeria last year to $50 million due to naira weakness, Moody’s said in a note, adding that the default at the affiliate company did not affect the parent’s credit profile.
Meanwhile, Fidelity Bank Plc’s investor relations team on Thursday revealed that its exposure to Etisalat Nigeria was about N17.5 billion ($56 million).
Rounding Up
Etisalat owes GTBank N42 billion and Access Bank N40 billion, while its exposure to other banks was yet to be disclosed.
Etisalat Nigeria has over 20 million subscribers, according to Nigeria’s telecom regulator, making it the country’s number four mobile operator with a 14 per cent market share.
South Africa’s MTN has 47 per cent, Globacom 20 per cent and Airtel – a subsidiary of India’s Bharti Airtel – 19 per cent.
When you write about Nigerian economy, you have this feeling that Nigerians do not like themselves. If things are right, Etisalat should not be in the forefront of this type of support. But the banks are always smarter – they had banked that Etisalat parent company will bail them out, if things go really bad.
But the game has changed because the parent company has no interest in a recession-ridden country called Nigeria. The question now is who will bail the banks by buying Etisalat Nigeria?