• Monday, June 24, 2024
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Banks see big opportunities in Nigeria’s syndicated loans

Nigeria’s borrowers have led the way in Africa’s syndicated loan market so far this year with more than $10 billion of deals signed or in the market, reports Reuters.

The appetite has been driven by a growth in confidence among international lenders as the nation’s economy makes inroads into resolving transparency and credit risk concerns.

MTN Nigeria became the latest borrower last week when it agreed a $3 billion loan to expand its network through Guaranty Trust Bank and other lenders Citigroup, Standard Chartered, Industrial and Commercial Bank of China, China Development Bank and China Construction Bank.

Meanwhile, Dangote Group is in talks to raise a debut $3.5 billion loan to fund fertiliser and oil refinery projects with lead banks Barclays, Guaranty Trust Bank, Standard Bank and Standard Chartered.

Combined, the two jumbo loans almost match the $7.96 billion Nigerian borrowers raised throughout 2012, which is the country’s highest-ever annual loan volume.

“The feeling is that Nigeria will have outstripped South Africa as the top market by 2015 from a loan market perspective. You have already seen that this year – you can’t ignore Nigeria”, one London-based banker said.

Read also: Nigeria leads in African syndicated loans market

Also this year, Nigerian National Petroleum Corporation (NNPC) agreed a $1.5 billion corporate deal in January, Indorama Eleme took a $800 million project finance loan in mid-February to fund a $1.2 billion green field fertiliser project, and oil and exploration company Neconde Energy marked its debut in the market with a $470 million corporate deal in early April.

Nigerian banks have traditionally been rare borrowers in the loan market, but Skye Bank became the first since 2008 when it agreed a $150 million debut in May last year, while Fidelity Bank recently agreed an oversubscribed $100 million debut deal through coordinators Citigroup and HSBC.

The deal’s success is expected to buoy appetite from fellow bank borrowers, with First City Monument Bank expected to return after a four-year hiatus and Skye Bank already eyeing the market for a speedy return.

“Nigerian banks have been through their reshuffle and I think there is a bit more trust and transparency from the banks than there previously was”, a second London-based banker said.

Increasing transparency and the rapid growth of strong parent companies — South Africa’s MTN Group for MTN Nigeria’s multi-billion deal, for example — means more international banks are opening up their books to cash in on what is considered a huge potential market.

“Nigeria is a big economy and it poses as a very good window for investors to get started on the continent, which will benefit the whole of sub-Saharan Africa”, a third London-based banker said.

The International Monetary Fund (IMF) forecasts 7 percent growth in Nigeria over the next two years, in contrast with South Africa’s — historically a syndicated loan hot spot — forecast of 2.8 percent in 2013 and 3.3 percent in 2014.

Nigeria’s foreign direct investment is projected to continue rising, from $5.8 billion in 2011 to $6.8 billion for last year, once the figures are in, the IMF said. It projects FDI to grow to $7.3 billion this year, $8.7 billion next year and $9.6 billion in 2015.