The Nation Newspaper

Tag: loans

  • Fed Govt to get more loans

    • FEC okays debt management strategy

    The Federal Government yesterday said  it will focus more on obtaining external loans over the next three years as earnings from oil dwindle.

    It is exploring this option  to allow local  banks  extend credit facilities to the private sector to spur economic growth.

    The Minister of Finance, Mrs. Kemi Adeosun, disclosed this to State House correspondents at the end of the Federal Executive Council (FEC) meeting chaired by Acting President Yemi Osinbajo.

    She was accompanied by the Minister of Information, Lai Mohammed and the Minister of State for Budget and National Planning, Zainab Ahmed.

    According to her, the new policy is part of the Debt Management Strategy for this year to 2019 approved by FEC yesterday.

    She said: “Today I presented a memo to the FEC which was approved for the debt management strategy for the years 2016-2019.

    “Nigeria started producing debt management strategy in the year 2012 and three years debt management programme and the previous ones had expired December 2015 and there was a need for a new one.

    “There was a need for a new one for two reasons; one was that the previous one had expired and two; given the current economic challenges and then the economic circus of this government to reflate and diversify the economy.”

    She also said there is need for a new debt strategy in order to base it on the Medium Term Expenditure Framework (MTEF).

  • Worries over banks’ rising non-performing loans

    Worries over banks’ rising non-performing loans

    With over N649b recorded as non-performing loans in the banking industry last year which is almost at the 5% regulatory threshold, stakeholders agree that this call for serious concern to prevent liquidity crisis in the sector, reports Ibrahim Apekhade Yusuf

    The balance sheets of most of the deposit money banks (DMBs) are bleeding badly as a result of the humongous debt overhang in form of non-performing loans (NPLs).

    A NPL is one which interest is overdue and full collection of principal is uncertain. It is either in default or close to being in default.

    In last assessment of the balance sheets of most of these banks, the Central Bank of Nigeria observed that energy companies in the country are indebted to commercial banks to the tune of about N3.673 trillion.

    This was in spite of several warnings by the CBN and other economic analysts, against the backdrop of declining fortune of crude oil in the international market.

    Giving a breakdown of the figures, the CBN stated that in the industrial segment, oil and gas firms’ aggregate credit stood at N2.153 trillion as at March 2015, compared to N2.3 trillion in February 2015 and N2.047 trillion as at December 2014.

    As to be expected by the time most of these banks closed their books, it became clear that their overexposure to the oil and gas sector after the shock s of the global oil prices was not only going to affect their bottom line substantially but would also have a rippled effect on their loan portfolio.

    Banks with non-performing loans

    Findings by The Nation revealed that First Bank of Nigeria net profit fell from N86 billion in 2014 to N15 billion in 2015, following rising impairments on Nigeria’s economy, owing to falling crude oil prices.

    The bank’s non-performing loans ratio stood at 22percent at the end of March, compared with 3.8 percent a year earlier.

    Confirming this development, Adesola Adeduntan, chief executive officer of First Bank while speaking with Bloomberg in Lagos recently said the bank’s number one priority is reducing the figure.

    “The bank will do that by reducing the proportion of its lending to the oil and gas sector, currently at about 39 percent of total loans, and focusing more on blue-chip companies in other industries,” he said.

    First Bank is not alone as far as NPLs is concerned. While speaking at the ‘Facts behind the figures’ held in Lagos recently, the Chief Financial Officer of Union Bank, Oyinkan Adewale disclosed that the bank’s non-performing loans ratio, which was 16.99 per cent at the end of 2015 and 6.90 per cent at the end of the first quarter of 2016.

    “The coverage on those NPLs is almost 200 per cent. The NPL figure is a figure. It is a statistics. As the CFO of the bank, what is in a risk is how covered it is. The NPL is well covered. There is also 200 per cent for the loans,” she said.

    Extracts of the bank’s financials presented at the event showed that NPL ratio grew from N9.9 billion in full year(FY) 2012 to N26.6 billion in first quarter (Q1) 2016.

    Besides, the NPL ratio grew from 5.1 per cent in 2011 to 6.99 per cent in 2015. Adewale, however, noted the bank is also prudent with its loans as its loan to deposit ratio which grew by 41 per cent in 2014 was modulated to 13 per cent in 2016.

    Investigation by The Nation revealed that Fidelity Bank’s total impairment charge in 2015 Financial Year (FY) was N5.7bn. The bank also wrote off N2.7b as bad loans in the 2015 financial year.

    During its Annual General Meeting, Ladi Balogun, Group Managing Director/Chief Executive Officer, First City Monument Bank Limited said the bank is doing everything within its powers to mitigate the challenges.

    “In spite of the adverse impact of the treasury single account (TSA), our balance sheet size remained fairly stable during the year as a result of our focus on retail banking. Our loan book declined 5% from N618 billion in 2014 to N593 billion in 2015,” he said.

    Rage over rising NPLs

    In the Financial Stability Report, released on Wednesday and signed by CBN Governor, Godwin Emefiele, showed that NPLs in the banking system rose sharply by 78 percent year-on-year to N649.63 billion in 2015.

    At the 326th meeting of bankers’ committee held recently in Lagos, Director of banking Supervision, Mrs. Tokunbo Martins shed light on the incidence of NPLs in recent times.

    Giving reasons for the NPLs, Martins attributed it to the economic downturn. “If people are not being paid their salaries and are thus unable to pay their loans, it is not unexpected. If corporate bodies are not doing well as they used to and are not able to pay their loans, it is not surprising that non-performing loans are rising. The average figure of five percent non-performing loan is not out of this world.”

    Pressed further, she said: “On the other hand, it is not really that we are resting on our laurels, the bankers’ committee did discuss it. We spoke about such things as debt factoring. This is not something that has been done yet, but there were some discussions about it.”

    Nigerian banks, which have a total loan portfolio of about N13trillion, have been reporting higher levels of NPLs in their 2015 results, citing weak economic conditions precipitated by the slump in oil prices.

    Ratings agencies, including Fitch and Moody’s, have downgraded the credit ratings of several large Nigerian banks because of rising NPLs.

    While commenting on the incidence of NPLs in banks, CBN spokesman, Mr. Isaac Okoroafor said loans are parts of business, adding that they should not be seen as a sign of weakness in the banking sector.

    “Non-performing loans occur, when economic situation is not very good, especially now that oil price is plummeting. But we have it as a duty to ensure that the level will not threaten the existence of banks because of failing oil price,” he explained.

    In the view of President, Association of Banks, Insurance and Financial Institution (ASBIFI), Sunday Salako the rising bank debt is a result of current economic meltdown affecting businesses.

    “Many people will borrow to import certain things with the hope to sell, make gains and return bank’s money. But the thing is that they have imported and people are not buying; some have produced, and cannot sell,” he lamented.

    Adducing reasons for the high non-performing loans, a source with a new generation bank who asked not to be named, said loans were given to some powerful Nigerians considered as “sacred cows” without tangible and verified collateral.

    He recalled that some powerful Nigerians obtained loans with the mindset of not paying.

    “They knew from day one that they wouldn’t pay because of internal connivance. These debtors had given part of the loan as gratification to some staff in order to circumvent the procedure. That is why many of them have no tangible collateral and there is no way you can force them to pay. On the long run, such loans are classified as bad debt. We have rescheduled and extended many of them. But the more you reschedule, the more you will be eating into your profit margin,” he said.

    Continuing, he said: “Even the method of loan recovery, which the Central Bank introduced, is not working. It is impacting negatively on many of the banks. I mean the ‘name and shame’ method of loan recovery. It has brought many of the banks into litigation, as many of the personalities whose names we published had divested from the companies alongside which their names appeared. This is a major challenge.”

    Way out

    In the view of Tobe Nnadozie, Divisional Head, Innovation and Products, Heritage Bank Limited, banks need to adopt innovative measures in the face of the economic downturn.

    “Certainly because of the prevailing economic challenges banks have to look at more creative ways to grow their bottom line. You know in the recent past, banks had to rely heavily on FX-related businesses to generate the highest deposits. However, what they can do now is to try to add value to customers beyond what they used to do.”

    Specifically, he said banks need to give more value in terms of products and services to customers.

    Pressed further, he said: “We’re helping the states to plug loopholes because we reckon that once we are able to help them plug these leakages they can save at least 40-60 per cent in IGR. In these day and time, banks, of course, have more fool-proof businesses. Most banks were involved in public sector business before now. But right now, there is no need to have over staff pursuing public sector. At Heritage Bank, rather than lay off people, what we have done is to reassign most of our staff to help drive innovations. And that is working.”

  • Diamond Bank loses N35.7b to bad loans

    Diamond Bank loses N35.7b to bad loans

    •CEO under pressure to deliver better returns

    Diamond Bank Plc has reported after-tax loss of N9.9 billion, driven by 206 per cent year-on-year rise in loan loss provision to N35.7 billion, in the fourth quarter of last year.

    Analysts at FBN Quest, an investment and research firm, said although pre-provision profit grew by eight per cent, while operating expenses declined by 17 per cent, the negative on the provisions line proved more significant and led to a pre-tax loss of N11.5 billion.

    The result, already published on the Nigeria Stock Exchange (NSE), showed that funding income fell by 10 per cent year-on-year. The pre-provision profits grew by 39 per cent quarter-on-quarter, driven by the strong growth (212 per cent) in other income.

    On a full year, 2015 basis, profit before tax fell by 75 per cent year-on-year, largely driven by a 109 per cent rise in loan loss provisions to N55.2 billion. The analysts said the decline on the profit after tax line narrowed to 69 per cent due to a positive result of N2.2 billion in other comprehensive income.

    “Diamond Bank’s results imply a Return on Average Equity (ROAE) of 3.7 per cent. This ranks among the lowest within our universe of bank stocks. Given the weak set of results and the year-on-year decline on the funding income line, we would expect the line to be one of the focal points of discussions on the bank’s conference call. We also expect the impairments and cost of risk to come under some scrutiny,” the analysts said.

    The analysts also expressed concerns that the lender’s asset quality are likely to linger.

    Afrinvest West Africa Plc’s report on the bank’s fiscal year 2015 and first quarter 2016 showed that while gross earnings growth slowed to record low, N55.2 billion, credit impairment charges also led to a 77.8 per cent decline in net income. This was triggered by huge exposure of loan portfolio to Oil & Gas (29 per cent) and General Commerce (20 per cent), which accounted for 13 per cent and 42 per cent of non-performing loans respectively as at nine-month results.

    The bank’s 2015 result was weakened by asset quality deterioration, which translated into higher cost of risk (CoR) ratio, which increased to 6.7 per cent from 2.4 per cent in prior year, as impairment charges jumped by 109.2 per cent. The bank’s shares have declined by 35.2 per cent year-to-date, worse than the 13.4 per cent return on the All Share Index.

    The result, analysts said, put the bank’s CEO, Uzoma Dozie, on the hot seat as he struggles to keep the mid-tier lender profitable in the face of significant weakness in the assets quality traceable to poor credit risk management strategy.

  • Increased Chinese loans to Nigeria

    Increased Chinese loans to Nigeria

    During his official visit to China, President Muhammadu Buhari concluded with the Chinese president a $6 billion loan to Nigeria for the construction of the Lagos-Calabar rail project. Nigeria is to provide some N40 billion as counterpart funding for this huge infrastructure project, the largest since the Chinese built in the 70s the Tan-Zam railway, linking Tanzania with Zambia.  It is the largest ever Chinese loan to an African state. Despite some legislative hiccups here in Nigeria over the counterpart funding, the project will almost certainly go ahead. Nigeria needs it badly to provide a coastal railway between Lagos and Calabar with future possible lateral rail connections on the route. The critical importance of this project to Nigeria is so obvious that it should not evoke any controversy. It should go ahead as speedily as possible.

    In recent years, China’s loans and investments in Nigeria have increased significantly. Before the current $6 billion loan, total Chinese loan to Nigeria was $13.3b, roughly a third of its total loans and investments in Africa. In 2015, President Goodluck Jonathan secured a Chinese loan of $1.5b for infrastructure support, including the development of the aviation sector. Chinese investments in Nigeria and Africa have become even more critical in view of the global recession, the fall in oil prices, and the inability or unwillingness of the G7 states to make fresh investments in infrastructure developments in Africa. For instance, in 2015 President Barack Obama announced a miserly $8b as the total US foreign direct investment in Africa. Over the years cumulative G7 investments in Nigeria and Africa have fallen sharply, partly due to disappointment with African states in the management of their economies, particularly over the prevailing corruption on a massive scale in these African states, as well as internal pressures in the G7 countries for greater internal social development. There is growing turmoil in most of the advanced industrial countries that makes foreign investment less attractive and a distraction from facing their own domestic severe economic challenges. The home front has become a priority for them.

    In this situation, China is better placed to take up this slack in foreign investment in Africa. It is the second global largest economy and has the largest reserves of US dollars. It is investing massively in Europe, Asia and the Americas, including the US where it is buying up blue-chip companies. Though its economy has slowed down to only seven per cent this year, it is still the fastest growing economy in the world. China’s interest in Africa, particularly Nigeria, should be viewed largely on economic terms. It is not wholly benevolent. China will in future need new and large commercial markets, which only Africa can provide. Increasingly, China’s exports will face restrictions in Europe and the US, currently its biggest markets. It will have to look for new markets in Africa where the population projection is that in the next two or three decades, Africa’s total population could be close to two billion. It is this huge market that China is eyeing. The Chinese have a reputation for long range planning, in decades, well ahead of their economic and industrial rivals.

    Until recently, Nigeria has been rather slow in seeking closer economic relations with China. As Amb. Olu Sanu, a former Nigerian Ambassador to China, observed in his recently published biography, Nigeria was really not serious about promoting economic relations with China, until recently. From 1972, when Gen. Yakubu Gowon first visited China as head of state, virtually every Nigerian head of state, including the late Gen. Sani Abacha, has paid an official visit to China, to ask for Chinese technical and financial assistance. When granted by the Chinese, who were eager to promote economic relations with Nigeria, these offers have not been duly taken up by the Nigerian authorities.

    For most of the time the military were in power in Nigeria, they were suspicious of the Chinese spreading their socialist doctrines to Nigeria. Such suspicions no longer exist. Nigeria recognised China in 1973 and supported its admission to the UN, thus ending China’s international isolation. In addition, the periodic oil boom made offers of Chinese financial assistance somewhat less attractive. Now, the situation has changed. China is still a one party communist dictatorship, but its economy is becoming increasingly diverse, freer and capitalist in structure. China is no longer interested in spreading its socialist doctrines to any country, particularly in Africa.

    Nigeria’s economic and financial situation has changed drastically. Its estimated growth rate this year will be only two per cent, a drastic fall from its 2014 growth rate of nearly seven per cent. Without the injection of fresh foreign capital, its future economic growth prospects are dismal. New jobs, on a massive scale, are badly needed to contain and reduce possible social tensions that may tear the nation apart. It is in this light that the $6b Chinese loan for the Lagos-Calabar rail lines should be viewed. The project will create new jobs. The Chinese are already involved in the development of railways in Nigeria. They handled the refurbishment of the Lagos-Kano line, as well as the fast train from Kaduna to Abuja. They have an impressive global reputation and record in the business of railway development. Even in Europe, Chinese expertise in this respect is highly valued and respected.

    Of course, Nigeria should be concerned about its growing trade imbalance with China. Chinese exports to Nigeria represent some 80 per cent of its total trade with Nigeria. This is an awful trade gap that Nigeria should seek to address. Nigeria must also find ways of blocking Chinese exports to Nigeria of cheap and fake products, such as textiles, plastics and drugs. It is obvious that Nigeria, with the connivance of our own traders, is being used as a dumping ground for cheap Chinese products. It is up to Nigeria to take proactive measures within the ITO provisions to reduce this huge trade imbalance. It should take advantage of the Chinese ‘benevolent trade policy’ to reduce the trade imbalance between the two countries. Under this policy, the Chinese are obliged to buy up our surplus export commodities, as it is doing in Tanzania in respect of coffee and tobacco. The problem is that Nigeria has little or no agricultural surpluses that the Chinese can buy up.

  • Rotary gives interest-free loans

    Rotary gives interest-free loans

    Rotary Club of Omole Golden has given 10 small scale business owners N50,000 credit facility each to improve their businesses.

    Speaking at the ceremony held at Excellence Hotel, Ogba, Lagos, the club’s President, Idowu Afelogun, said the intervention fund was meant to give small businesses a new lease of life.

    “We found out that so many young persons have had their dreams cut short as a result of lack of funds. So many others do not have the capital to move their business forward. That is why we decided to set up a micro-credit scheme to assist anyone in business,” he said.

    The president said beneficiaries are expected to pay back in six months, adding that facility is open to all beneficiaries who faithfully repaid their facility.

    Afelogun advised the beneficiaries to  use the fund judiciously and be a good ambassador of their guarantors .

    He urged the guarantors to continue to mentor their wards to ensure that they succeed in their endeavours, as their failure will jeopardise continuation of the project.

  • Falana advises against World Bank, ADB loans

    Falana advises against World Bank, ADB loans

    Lagos lawyer Femi Falana (SAN) has urged the Federal Government to recover over $200 billion stolen wealth instead of taking a loan of $3.5 billion from the World Bank and the African Development Bank (ADB).

    Falana said if government refused to accede to the request, “we shall have no alternative than to initiate legal proceedings at the Federal High Court with a view to restraining the Federal Government from further plunging the nation into external indebtedness”.

    The request was contained in an April 8 letter, addressed to the minister of Finance, titled: “Request for the collection of outstanding revenue of $200 billion withheld from the federation account or stolen by looters”.

    In his initial letter to the minister dated February 12, the lawyer urged the Federal Government to explore alternative sources of raising revenue to fund the 2016 budget, instead of increasing the nation’s external debt of $64 billion.

    He had also requested the Federal Government to recover the $42 billion withheld from the Federation Account from 1999-2012 by some transnational oil companies, Nigeria National Petroleum Corporation and other agencies, noting that the minister, in her reply dated March 17, gave assurance  that the issues raised were receiving attention.

    “We were, therefore, surprised to learn that the administration had applied to the Chinese Government for another loan of $2 billion. In urging the Federal Government to desist from taking the loan of $2 billion from China or any other country, we are compelled to advise the Federal Government to intensify efforts to recover the nation’s wealth, which has been criminally diverted by a handful of local and foreign looters”, he said.

    Falana advised government to direct the relevant agencies and the anti-graft bodies to collect the stolen wealth, and listed 17 areas where such funds will be collected.

    According to him, “the National Extractive Industries Transparency Initiative has confirmed that from five cycles of independent audit reports of NEITI, covering 1999-2012  the NNPC, some oil companies and certain agencies of the Federal Government withheld $20.2 billion for the Federation Account. The indicted oil companies and agencies should be made to remit the $20.2 billion  into the Federation Account.

    ”In 2006, the Central Bank of Nigeria apportioned $7 billion of the nation’s external reserves to 14 Nigerian banks. In 2008, the CBN also gave a bailout of N600 billion ($4 billion) to the banks”.

    He recalled “on September 6, 2016,  the NNPC  announced that arrangements had  been concluded to  recover $9.6 billion in over-deducted tax benefits from joint venture partners on major capital projects and oil swap contracts. Since the NNPC is said to have recovered  $9.6 billion it should be remitted into the Federation Account”.

    Falana said Mobil Producing Nigeria Unlimited since 2009 has been owing government $1.9 billion, being outstanding of the $2.5 billion charged the oil company for the renewal of licences adding: “From 1998-2014, the Federal Government collected over $4 billion from the over $5 billion stolen from the CBN by the late General Sani Abacha. I have submitted a petition to the Economic and Financial Commission to investigate the alleged criminal diversion of the recovered loot by some former public officers. The governments of the United States and Switzerland have promised to repatriate $458 million and $321 million recovered from the loot.

    “In 1999, the Abdulsalami Abubakar military junta enacted theDeep Offshore Inland Sharing Contract Decree to give effect to certain fiscal incentives for the oil and gas companies operating in the Deep Offshore and Inland Basin under production sharing contracts. Thus, by virtue of Section 5 of the Act, the payment of royalty in respect of the Deep Offshore production sharing contracts shall range from four to 12 per cent while no royalty shall be paid whatsoever in areas in excess of 1,000 metres depth! Since the 15-year period for non-payment of royalties expired in June 2014, they should collect arreas of royalties running to hundreds of million of dollars owed by the oil and gas companies operating in the area”.

     Other areas include “the  abandoned $470 million contract awarded to ZTE (a Chinese company) in 2009 by the Federal Government for the construction of CCTV cameras in Abuja and Lagos . Hence, the cameras, which were installed, did not capture the criminals, who launched bomb attacks in Abuja, and killed scores of citizens. Since the contract was not executed, the Federal Government should recover the $470 million.

    “In the Appropriation Act, 2011, N245 billion was earmarked for fuel subsidy. In violation of the budget law, the Federal Government fraudulently paid out N2.5 trillion ($16 billion) to a cabal of fuel importers. The investigation conducted into the large scale fraud by the Police and the anti-graft agencies was compromised due to pressure from the Jonathan administration. The EFCC should revisit the matter.”

    He went on:  ”For contravention of the law on compulsory registration of SIM cards, the NCC imposed a fine of $5.2 billion on MTN last year.  Based on pleas by the MTN management and the intervention of South Africa, the fine was reduced to $3.9 billion, of which MTN paid $250 million. Since MTN has withdrawn the suit challenging the payment of the fine, the Federal Government should ensure the prompt payment of the balance of $3.65 billion.

    “Under the ex-President Goodluck  Jonathan administration, it was estimated that the nation was recording oil theft worth $7 billion to criminals annually. An investigation by a team of lawyers hired by the Federal Government confirmed that hundreds of millions of barrels of oil were stolen by oil companies and shipped to many countries. According to the lawyers,  the amount recoverable by the government from the sellers and buyers, who stole Nigeria’s hydrocarbons and shipped same to the United States from January 2011 to December 2014, stands at $12.7 billion. Since the verification is programmed to cover 10 years, it is estimated that Nigeria can recover not less that $100 billion from the undeclared millions of barrels of oil shipped to the United States and other countries. The EFCC should collaborate with the lawyers to recover the  missing fund and prosecute the transnational oil companies involved in the grand oil theft.”

  • Falana to govt: recover outstanding $66.5b loans, others

    Falana to govt: recover outstanding $66.5b loans, others

    Lagos Lawyer Femi Falana (SAN) yesterday urged the federal government to recover its outstanding $66.5billion in loans, royalties, levies and other recoverable revenues instead of “seeking an emergency loan of $3.5 billion” to fund ots ambitions N6.8 billion loan

    In a letter to Minister of Finance Mrs Kemi Adeosun dated February 12,  Falana hinted of his plan to seek the leave of the court “not later than February 29” to stop the government from taking the loan, since “you have not deemed it fit to react to the serious issues raised in the letter.’

    Falana had written a letter dated February 5, addressed to the minister, cautioning the government against taking an emergency $3.5 billion loan.

    But the federal government has since announced that it is not taking “any emergency loan” to fund its 2016 budget plans.

  • Adeosun explains strategy for Nigeria’s foreign loans

    Adeosun explains strategy for Nigeria’s foreign loans

    The Minister of Finance, Mrs. Kemi Adeosun, yesterday gave further clarifications on the strategy for foreign loans being explored to fund the 2016 budget, which is undergoing approval by the National Assembly.

    The minister, in a statement, explained that the overall objective is to provide the lowest possible cost of funds to finance capital projects proposed under the government’s plan to stimulate the economy. These capital projects include power, transport, road, housing and others.

    In the statement endorsed by Special Adviser to the Minister on Media Matters, Mr. Festus Akanbi, the minister explained that options with multi-lateral agencies including the World Bank and African Development Bank (AfDB) are being explored. Multilateral agencies provide loans on concessional terms, which include low interest, moratorium before repayment and long tenor.

    The second funding option being explored includes export credit agencies such as China Exim Bank. These funds are also concessional and are tied to specific capital projects.

    She said the need to invest in infrastructure to stimulate the economy and the long-term payback period of capital projects demands that the lowest cost of funds be obtained.

    She stated that the balance of foreign borrowing required will be raised in the Eurobond market at commercial rates of interest.

    The minister explained that by blending these different sources of funding, the overall cost of funds will be maintained at the lowest possible level.

    “As far as possible, our foreign borrowing will be tied to specific capital projects. A number of these projects are revenue generating which will be used to fund the loan repayments,” she was quoted as saying in the statement.

    The strategy of pursuing increased foreign borrowing is designed to ensure that the Federal Government does not “crowd out” the private sector in the domestic market.

  • Etisalat seeks $2b bank loans

    Etisalat seeks $2b bank loans

    United Arab Emirate (UAE)-based telecoms operator, Etisalat is talking to banks about raising a $2 billion loan as the telecommunications firm seeks funding amid a shift in Gulf loan markets.

    It  joins a flurry of regional companies seeking to secure funding before a likely rise in United States (U.S.) interest rates pushes up borrowing rates, while the availability of loan finance is also being impacted by a liquidity squeeze within Gulf banks.

    Sources aware of the matter told Reuters that Etisalat is keen to close the loan, which will be structured as a revolving credit facility, in the first quarter of next year.

    One of the sources, at an international bank, said the loan would be classified as a stand-by facility, meaning Etisalat could ask for lower pricing as further fees would be levied if the cash is utilised.

    Nobody was immediately available to comment from Etisalat.

    Companies in the UAE have enjoyed several years of cheap funding as banks built up huge capital cushions as a result of strong oil prices.

    But the weakening in oil markets since last year has raised fears of a liquidity squeeze, compounded by expectations that governments in the region will follow an expected move by the U.S. Federal Reserve by raising interest rates in coming months.

    The majority government-owned firm provides services to 169 million subscribers in 18 countries across the Middle East, Asia and Africa, according to Etisalat’s website. In September it allowed foreign and institutional investors to own its shares.

  • N300b loans for farmers

    N300b loans for farmers

    FARMERS are in for good times – courtesy of the Central Bank of Nigeria (CBN) and commercial banks which have agreed to grant N300 billion loans to the agricultural sector next year.

    CBN Governor Godwin Emefiele, who is also the Bankers’ Committee chair, broke the news at the  weekend. He said the committee’s  plan was to get banks to use some of their liquidity to grant new loans to the agricultural sector and its value-chains. It was at the closing of the committee’s seventh retreat in Lagos.

    The CBN boss said although there were other intervention funds in the agricultural sectors, which have been substantially disbursed, the N300 billion is a new lending plan. It involves getting the banks to use some of their liquidity to fund agriculture.

    “That is why we are talking about removing risk elements along the value-chain, so that banks can lend more to the agric sector. This is a new initiative, and we believe that based on the need to de-risk the value-chain, the loans will be repaid, and jobs will be created for the people,” he said.

    Emefiele said the Bankers’ Committee also felt that monetary and fiscal authorities must work together in collaborative manner to achieve the objective of improving local production of specific agricultural products, such as rice, tomatoes, fish and sugar among others.

    Such practice, he said, would create reduction in demand for foreign exchange that will help conserve foreign reserves and, by extension, strengthen the local currency.

    “We agreed to increase lending to the agricultural sector. Banks know that there is need to improve the level of infrastructure in various sectors, for instance, build more FADAMA roads, provide more power in the various sectors of agriculture, build more silos and warehouses to receive final produce so that products don’t get destroyed right at the farms,” he said.

    The FADAMA roads, the CBN chief said, will make it easier for goods to be transported from the local communities to areas where they can be sold for the benefit of the farmers.

    “Banks, therefore, set a target to boost agricultural lending, not only to Small and Medium Enterprises, but also to large scale farming and companies by up to about N300 billion in 2016. The banks realised that there is a need to have a paradigm shift, in the feeling that SMEs are a danger sector to lend money,” he said.

    Emefiele said lenders had recognised that the Bank Verification Number (BVN) will assist in creating a pool of SMEs loans in the country, and have agreed on the need to empower SMEs through capacity building skills, such as record keeping, understanding how to run their businesses to make them more bankable.

    “Banks agreed to support all efforts of government to boost employment for young graduates. The banks also identified power, transportation and other infrastructure as strong enablers and drivers of growth in the economy that the banks will try as much as possible to play their parts to support financing of power and transportation projects,” he said.

    Emefiele said that all hands must be on deck, not just on the part of monetary authorities, but from the fiscal authorities to boost power, transportation for the banks to achieve the goals of improving the economy.

    “The Bankers’ Committee is geared to support the efforts of government to create employment and support government’s efforts to diversify away from oil, support the efforts of the ministers of agriculture, power and transportation as well as solid minerals and finance to achieve the objectives of government in 2016,” he said.