Naira devaluation to blame for our N377bn debt crisis – Etisalat

The Nigerian affiliate of Abu Dhabi-listed telecoms company Etisalat is in talks with 13 Nigerian banks to renegotiate the terms of a $1.2 billion loan it took out four years ago after missing a payment.

At current official rate, the loan, without interest stands at N377 billion.

Ibrahim Dikko, vice president for regulatory affairs at Etisalat Nigeria, said Etisalat missed payments due to the economic downturn in Nigeria, a currency devaluation  and dollar shortages on the country’s interbank market.

“We are in discussions with our bankers and have been for quite a while. They have not taken over the business and we are hoping that we can resolve the issue and find a way to renegotiate terms,” Dikko told Reuters.

Emirates Telecommunications Group (Etisalat) owns a 40 percent stake in its Nigerian affiliate, which accounted for around 3.7 percent of the group’s revenue in 2013.

Etisalat Nigeria signed a $1.2 billion medium-term facility with 13 Nigerian banks in 2013, which it used to refinance an existing $650 million loan and fund a modernisation of its network.

Dikko said the business performed well last year and it was still in profit at the level of earnings before interest, tax, depreciation and amortisation, while loan repayments had been up to date “until recently”.

He said that the company was now looking at “all the options”, which could include converting the loan into naira, but did not want to anticipate the outcome of talks with the lenders.

A banking source said Etisalat Nigeria had given notice to Nigerian lenders that it would miss a payment in February which triggered a debt discussion, adding that they were yet to agree on terms.

“We want to see more skin in the game from the foreign parent. They also have a shareholder loan we want them to convert into equity which would put less pressure on cash flow and its receivables,” the banker said.

The source said lenders wanted Etisalat to increase its stake in its Nigerian affiliate in order to reduce the risk of the company pulling out of the country due to the debt issue.

Banks involved in the loan deal include: Zenith Bank , GT Bank, First Bank, UBA , Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank.

Several other firms took out dollar loans in 2013 to expand at a time Nigeria was seen as an attractive investment prospect. Its economy was growing at 7 percent with a stable currency and oil prices were rising.

But now the country has been running short of dollars as oil revenues have fallen along with the price of crude, pushing the economy into its first recession in a quarter of a century.

That has weakened the naira which trades at a lower level on the black market than the official interbank rate versus the dollar.

The dollar shortages have made it difficult for local companies to get access to foreign currency and as a result some have struggled to repay dollar-denominated debts with several lenders having restructured loans to oil firms.

Last month Nigeria’s biggest airline Arik Air was placed in receivership by the country’s “bad bank” AMCON for unpaid debts of around 147 billion naira.


Source: The Cable

Why Presidency Is Against Naira Devaluation- Osinbajo

The Nigerian Vice President, Professor Yemi Osinbajo, has given reasons for the government’s disapproval of further devaluation of the nation’s currency, saying it is not an appropriate option in the current economic realities and offers no solutions as far as the Buhari administration is concerned.

President Muhammadu Buhari had earlier expressed his views that a further devaluation of the Nigerian Naira was not healthy for the economy.

At a meeting on Thursday with the Italian Ambassador in Nigeria, Mr Fulvio Rustico and the Canadian High Commissioner in Nigeria, Mr Perry John Calderwood, in his office in Abuja, Vice President Osinbajo emphasised President Buhari’s views and said he would also not support further devaluation of the Naira.

He said: “I don’t agree on devaluation of the Naira and it is not that I am doctrinaire about it. In the first place, it is not a solution. We are not exporting significantly. And the way things are, devaluation will not help the local economy.”

“What we need to do is to start spending more on the economy and then things will ease up a bit”.

He observed that the issues around the economy were no exact sciences, stressing that “what is important is to be reasonably flexible in dealing with them”.

Credit: ChannelsTV

Naira will not be devalued further -Buhari

President Muhammadu Buhari said on Wednesday, in Paris, France, that he opposed a further weakening of the naira and openly endorsed the CBN’s policy of restricting foreign-exchange trading.

“I don’t think it is healthy for us to have the naira devalued further,” Buhari said in an interview with France 24.

“That’s why we are getting the central bank to make modifications in terms of making foreign exchange available to essential services, industries, spare parts, essential raw materials and so on – but things like toothpicks and rice, Nigeria can produce enough of those,” he said.

The nation’s revenue has been hit hard by the fall of global crude prices, and the CBN, which has been under pressure from foreign investors to further devalue the naira, has imposed increasingly strict foreign exchange rules to save the external reserves and avoid what would be the third devaluation in one year.

Nigeria had, last year, devalued the naira to N197 to the dollar from N160. The naira was further adjusted slightly in July to N199 to the dollar. As a result of the continued pressure on the naira, CBN introduced some measures to curb the excess demand for foreign exchange.

This, however, did not go down well with some of the foreign investors.

After the crash of oil prices last year, the CBN Governor, Mr. Godwin Emefiele, reacted to the naira’s drop to a record low in February by extending trading curbs and introducing bans on purchases of dollars by 41 items, which CBN said cannot access foreign exchange from the Nigeria market.

It will also be recalled that JP Morgan last week said it would remove Nigeria from its influential emerging markets bond index by the end of October, citing a lack of liquidity and the central bank’s currency restrictions.