Bank shares suffer losses as CBN, NCC step in to save Etisalat Nigeria from collapse

Central Bank of Nigeria and the country’s telecoms industry regulator, Nigerian Communication Commission (NCC) have intervened to save the country’s fourth largest telecoms firm, Etisalat Nigeria from collapse after talks with local banks to renegotiate a $1.2 billion loan failed, a regulatory source said on Tuesday.

Etisalat Nigeria is the biggest foreign-owned victim of dollar shortages plaguing the country due to lower oil prices and economic recession, leaving the company struggling to make repayments to lenders and suppliers.

The Nigerian Communication Commission (NCC) said Etisalat Nigeria and its creditors have reached a resolution on key issues on the indebtedness and that a transition process was continuing on mutually agreed terms.

It said the resolution would ensure that Etisalat Nigeria was maintained as a going concern regardless of changes in the company’s shareholders.

As a result, the company has appointed the central bank’s deputy governor Joseph Nnanna as chairman, Boye Olusanya as chief executive and Funke Ighodaro as chief financial officer, Etisalat Nigeria’s vice president for regulatory affairs, Ibrahim Dikko, told Reuters.

The regulatory source said the Central Bank had provided assurances to lenders but had not invested any funds, adding that the company’s minority owner, Abu Dhabi’s Etisalat, has indicated it may pull out of Nigeria following the debt crisis but has not made a decision on the use of its brand in the country.

On June 23 the central bank said Abu Dhabi state investment fund Mubadala, which had a 40 percent stake in Etisalat Nigeria, had already pulled out of the company and the debt negotiations.

The 13 lenders involved in the $1.2 billion loan deal arranged for Etisalat four years ago, have been under pressure to avoid loan-loss provisions and were pushing to finalise a restructuring before half-yearly audits due in June.

With central bank involvement, the lenders could get some forbearance on provisions pending when the debt crisis is resolved or the company is sold to new investors, the regulatory source said.

On Monday Chief Executive Matthew Wilsher resigned after Chairman Hakeem Belo-Osagie departed.

Last month lenders initiated changes in Etisalat Nigeria’s shareholding structure to enforce their rights under the loan default agreement. UAE’s Etisalat has said it is carrying its 45 percent stake in the Nigerian arm at nil value.

A source at the telecoms industry regulator said the new interim board made up of six members will operate for six months and will include a member representing the shareholders.

Regulators have said they want to protect Etisalat Nigeria’s 4,000 workers and are seeking to prevent lenders placing the telecoms firm in receivership in order to avoid a wider debt crisis. They held talks with Etisalat’s lenders last week, the regulatory source said.

Etisalat Nigeria has a 14 percent share of the country’s mobile market, behind MTN with 47 percent, Globacom with 20 percent and Airtel, a subsidiary of India’s Bharti Airtel, with 19 percent.

Nigeria bank shares suffer losses

Nigerian banking shares dropped 2.3 percent on Tuesday after regulators said they had intervened to save the country’s fourth largest telecoms firm from collapse as talks with local lenders to renegotiate a $1.2 billion loan failed.

Etisalat Nigeria had been negotiating with its lenders for more than five months to restructure a $1.2 billion loan it took out four years ago after missing several payments.

The news sent the banking index lower, which caused the main index to fall 1.1 percent as investors sold shares on worries that lenders may be forced to take a haircut on Etisalat’s loan.

The telecom industry regulator said Etisalat Nigeria and its creditors have reached a resolution on key issues on the indebtedness and that a transition process had been mutually agreed. Lenders have set up a new board for the company.

Half-year earnings season has started for companies listed on the Lagos bourse and lenders, under pressure to avoid loan-loss provisions, had been pushing to finalise restructuring talks before interim audits in June.

United Bank for Africa (UBA) topped the decliners with a fall of 5.75 percent. Pan-African lender Ecobank shed 4.94 percent, Diamond Bank and FCMB both lost 4.72 percent each.

 

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