Hope rises for dollar denominated debtors as naira strengthens

Companies which took loans in foreign exchange from banks in Nigeria and struggled with repayment as forex prices sky rocketed against the naira in the last one year, have expressed the possibility of paying back very soon, as the naira strengthens against the dollar.
BusinessDay sources at Etisalat Nigeria which had been threatened for missing debt payments of its $1.2 billion loan as a result of the weak naira and scarcity of foreign exchange, say that they are hopeful to pay back the loan as soon as possible, if the naira continues to strengthen and is at a favourable rate to the US dollar.
“As you know, we have had series of meetings with the Central Bank of Nigeria (CBN), Nigerian Communications Commission (NCC), and the said banks involved in the loan and we are still having talks with them. We had said we would pay back the loans but not at the rate of the naira to dollar, as at almost two weeks ago, when we had the meeting.
“There is a ray of hope that the money due might be paid sooner than we think, now that the naira is gaining strength and if it continues like this, we would definitely pay back due debts very soon,” our source said.
Analysts say there may be even more hope for the company to meet its debt obligations quicker, as the United States dollar may be set to crash further this week, as the Central Bank of Nigeria (CBN) plans yet another round of interventions in the interbank market.
Following last week Thursday’s forex wholesale auction, the CBN on Friday, March 24, 2017, concluded transactions on the sum of $100 million earlier offered at the interbank market to meet customers’ demands, out of which authorised dealers were only able to pick $81.347 million after an initial bid for $91 million.
Investigations revealed that the US dollar, Euro and the Pound, exchanged at the parallel market at the weekend at the rates of N375, N405 and N475, respectively, with the anticipation that the figures will further nosedive this week.
In 2013, Etisalat took syndicated dollar denominated loans from 13 Nigerian banks but the weakened naira, and the fact that their revenues are mainly in naira, despite servicing the same loans in dollars, as well as challenges in accessing dollars to service repayment of their interest obligations, made the company miss its February deadline to pay due loans.
Olusola Teniola, President of Association of Telecommunications Companies of Nigeria (ATCON), told BusinessDay in a telephone interview that; “Etisalat currently has obligations to pay debt instruments which the company took in dollars from banks at a time when the naira was much favourable than in February, when a portion of the loan was due. The value of the naira to dollar significantly dipped over time and they could not access foreign exchange at the time and that made it impossible for them to pay as at when due.”

According to Teniola, “There are other operators facing the same or similar issues with Etisalat,” but at least, the naira is beginning to gain strength, due to CBN interventions.
Ibrahim Dikko, vice president for regulatory affairs at Etisalat Nigeria, had earlier confirmed that Etisalat missed payments due to an economic downturn, currency devaluation and dollar shortages on the country’s interbank market.
Segun Oruame, Founder, QITECH Technologies Limited, told BusinessDay that it would be good for the CBN to make forex available and the value of naira stronger, as this would help businesses service their loans and carry out operations more smoothly and so the naira strengthening against the dollar further, is a step in the right direction, which would bring hope to businesses in the country.
“Etisalat could not make payment because of the foreign exchange policies currently in place in Nigeria. All telecom service providers are facing this problem because operations are based on forex availability for imports and other things.”

 

Jumoke Akiyode