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Senate to Investigation Etisalat Nigeria Default Loan

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Senate to Investigation Etisalat Nigeria Default Loan

Date: Jan 19, 2019
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Senate to Investigation Etisalat Nigeria Default Loan. By Camillus Eboh and Paul Carsten

The Nigeria’s Senate to Investigation Etisalat Default Loan. ABUJA, Oct 24, Senate voted in favour on Tuesday of launching an investigation into the default on a $1.2 billion loan earlier this year by Etisalat Nigeria and into how the funds were used.

Etisalat Nigeria, now called 9mobile, took out a syndicated loan from 13 Nigerian banks but failed to make repayments earlier this year.

“The Senate is aware of allegations that the loans had been diverted to other uses not related to the business, as there was no evidence of what the company did with the loans,” the upper house said in an order paper published on Twitter.

The vote mandates the Senate Committee on Banking and National Security to launch an investigation, which, if required, will pass its findings on to regulators including the financial crimes agency.

In its order paper the Senate also raised questions over the Abu-Dhabi listed parent company Etisalat, which subsequently terminated its management agreement with its Nigerian business and gave up its 45 percent stake.

“The decision of the core investors to pull out of Nigeria raises issues of suspicion, on the intent of a company in obtaining a loan facility, defaulting and then pulling out of the country, hoping that their shares would be used to write off the debts,” the document said, without naming Etisalat.

Etisalat declined to comment.

The motion said that, as of 2016, Etisalat Nigeria had started defaulting on its $1.2 billion loan obligations leading to a few bailouts from its parent company in Abu Dhabi.

The document also said it was understood that about 42 percent of the loan has been repaid, “remaining an outstanding debt of $696 million representing 58 percent of its capital, which Etisalat has failed to serve since 2016”.

Bukola Saraki, the Senate president, said after the vote that it was important to launch an investigation.

“We must protect jobs, corporate governance, investment climate in the country. I implore the committee to do a thorough job in the interest of the economy and the country,” he said.

Nigerian lenders have picked Barclays to try to find new investors for 9mobile, two banking sources told Reuters last week.

 

In another development, Nigeria’s Fidelity Bank has taken a 5 percent impairment charge on a 17.3 billion naira ($55 million) loan to Etisalat Nigeria, now called 9mobile, Fidelity Chief Executive Nnamdi Okonkwo said on Wednesday, in line with a central bank request.

Etisalat Nigeria took out a $1.2 billion syndicated loan from a group of 13 local banks four years ago but has defaulted on repayments this year due to a currency crisis and recession in Nigeria.

According to a banking source, the central bank had asked lenders involved in the loan to take a 5 percent provision as part of their third-quarter results.

Okonkwo said Fidelity Bank was also raising provisions across its loan book. “We are revising (the non-performing loan ratio) from sub-5 percent to sub-6 percent by end of the year, due to currency conversion and some risk on the oil and gas book,” he told an analysts call held to discuss its nine-month results.

“We have seen some improvements in the transport sector and the consumer book.”

Net loans stood at 753.8 billion naira as of September, up 4.9 percent from a year earlier. The bank was targeting 7.5 percent loan growth this year, Okonkwo said.

Fidelity Bank on Monday posted a pretax profit of 16.24 billion naira for the nine months through September, up from 9.83 billion a year ago.

Meanwhile, a court has ordered a temporary freeze on millions of bank accounts with incomplete identification documents and the forfeiture of funds in those accounts as the government seeks to ensure compliance with money laundering rules.

Okonkwo also said the bank had submitted details of personal and business accounts that lacked complete identification to the central bank following a court order. He declined to say how many accounts were involved.

The bank said it had notified customers about the court ruling and advised them to regularize their accounts.

Shares in Fidelity, which has gained 85 percent so far this year, rose 4.5 percent on Wednesday to 1.62 naira. ($1 = 315.00 naira)

 

 

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