Banks’ exposure to Etisalat Nigeria by numbers

The Etisalat debt default saga while negative for lenders does not pose a systemic risk!

Fig 1: Banks Exposure to Etisalat Nigeria

Banks Etisalat Loan N’m (Naira) Etisalat Exposure (Dollars) $’m
Zenith Bank 80,000 262.3
Guaranty Trust Bank 42,000 137.7
Access Bank 40,000 131.1
United Bank for Africa 38,000 124.6
FBN Holdings 24,000 78.7
Fidelity Bank Plc 17,000 55.7
Stanbic IBTC 7,500 24.6
FCMB 4,500 14.8
Ecobank 3,100 10.2
Union Bank Unknown
Total 256 839.7
Source: BusinessDay Market Intelligence

Etisalat Nigeria debt default to a consortium of Nigerian banks is another fallout from the dollar shortage crises and economic meltdown facing Africa’s largest economy. Luckily for the beleaguered banking sector and financial system it is not a systemic threat to operations. BusinessDays analysis of exposure by banks show that Zenith Bank has the highest loans outstanding to Etisalat at N80 billion or ($262 million at N305/$), followed by Guaranty Trust Bank (GTB), at N42 billion ($137.7 million), Access Bank N40 billion ($131.1 million), United Bank for Africa N38 billion ($124.6 million), FBN Holdings N24 billion ($78.7 million), Fidelity Bank N17 billion ($55.7 million), Stanbic IBTC N7.5 billion ($24.6 million), FCMB N4.5 billion ($14.8 million), and Ecobank N3.1 billion ($10.2 million).

The lack of systemic risk is seen in the fact that for Zenith Bank the Etisalat Nigeria loans are equivalent to just 3.38 percent of its total N2.36 trillion loan book at the end of 2016. For the next 3 largest lenders with exposure to Etisalat Nigeria the loans make up 2.5 percent of GTBs outstanding loans, 2.1 percent for Access and 2.5 percent for UBA as at year end 2016. News broke last week that the lenders seized control of a 45 percent stake from Emirates Telecommunications Corporation following the failure of talks about a $1.2 billion loan. The group of 13 Nigerian lenders ordered the Abu Dhabi-based company to transfer the shareholding to United Capital Trustees Ltd. by June 23.

Etisalat Nigeria is in the process of changing its shareholder structure and customer service won’t be affected, according to its vice president of regulatory and corporate affairs, Ibrahim Dikko. The banking consortium is expected to embark on a search for a buyer for a sector which is struggling with lower margins and churn. The country’s mobile-phone subscriber numbers fell to 152 million at the end of March from about 154 million the previous quarter, according to the Nigerian Communications Commission (NCC).

Any new owner would need regulatory approval to take over the operating license, said NCC spokesman Tony Ojobo. In March, the regulator urged the central bank to intervene in the Etisalat debt talks for fear that an asset seizure would send the “wrong signals” to potential investors in telecommunications. Nigeria’s Information and Communications Technology (ICT) sector has grown exponentially since the licensing of GSM operators in 2001 and has become the leading mobile telephony market in Africa, in terms of subscriber base and revenue and contributes $40 billion annually to nominal GDP. The resultant increase in investor confidence led to an abundant inflow of foreign direct investment (FDI) of more than $32 billion over the last 14 years.

Etisalat trails its three main mobile-phone rivals in terms of subscriber numbers, with about a third of market leader MTN Group Ltd.’s 60 million customers. Bharti Airtel Ltd.’s local unit and Lagos-based Globacom Ltd. make up the quartet. Nigeria’s banking index has gained 40 percent this year led by rallies in Guaranty Trust Bank, Zenith Bank and United Bank for Africa, the three biggest lenders on the Nigerian Stock Exchange Banking 10 Index.