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The Etisalat N541 billion debt debacle

By Cos Nnadi
07 July 2017   |   3:13 am
The surreal tale surrounding a $1.2 billion (about N541 billion) loan given to a foreign-owned private company by a consortium of 13 Nigerian banks is staggering.The syndicated loan was given to Etisalat Nigeria in which Emirate Telecommunications Group Company...

The syndicated loan was given to Etisalat Nigeria in which Emirate Telecommunications Group Company (Etisalat Group) of United Arab Emirate.

The surreal tale surrounding a $1.2 billion (about N541 billion) loan given to a foreign-owned private company by a consortium of 13 Nigerian banks is staggering.The syndicated loan was given to Etisalat Nigeria in which Emirate Telecommunications Group Company (Etisalat Group) of United Arab Emirate (UAE) has the controlling shares of 45 per cent; followed by Mubadala Development Company also of UAE, which has 40 per cent; and a third firm, which represents the entire Nigerian shareholders and has only15 per cent. Etisalat Group secured the seven-year facility some time in 2013 to refinance a $650 million loan and fund the network expansion of its outpost, Etisalat Nigeria. Like others before it, the contractual relationship has gone awry and the N541 billion debt has become a subject of controversy.

Following its inability to repay since 2016 and the failure of restructuring talks, the Abu Dhabi-based parent company of Etisalat Nigeria cleverly latched on takeover threats by the lender banks to repudiate its legal obligations. It promptly transferred its 45 per cent stake and 25 per cent preferential shares to a loan trustee. To make it more insulting, the foreign firm declared that it has no further obligations under the contract as its stake now has a zero value in its books. All seven directors of Etisalat Nigeria – the six representing Etisalat Group and Mubadala, all UAE nationals; as well as the Chairman, Mr. Hakeem Bello – have resigned.  An orphaned Etisalat Nigeria is now making frantic efforts to have the loan written off as non-performing.

The question which this sordid transaction raises is: should our banks be subsidising the so-called foreign investors with depositor’s money? And what benefit accrues to the nation from such economic decisions? This is more so as the mission of these foreign firms is not social service but to make profits which get repatriated to their home countries soon after. At the end of the day, their economies receive a boost, ours shrinks.  Their local currencies get further strengthened against the naira, and Nigeria continues to lose respect among the comity of nations.

A N541 billion credit for a foreign company is by all standards outrageous; particularly in an ailing economy like ours. That the transaction has become controversial is calamitous. It reflects the poor business decisions that have helped to crumble our economy and plunge the nation into recession. The broad consequences of this debacle are far reaching. Among these are its negative impact on the balance sheet of the affected banks, the bleak prospects of dividends to shareholders, and the uncertain future of the employees of the banks. Of course, the worst hit in event of bank failures are those who took their monies to these financial institutions for safe keeping.

Granted that banks are into the business of lending funds, but should they not devote depositors’ money to grow local firms?  Several industries owned by our country men and women are in crying need of finances but no financial institution in Nigeria looks their way.  Workers in these local firms are being retrenched daily in the face of recession inflicted on the country by such poor business decisions. Indeed, many local companies have closed shop for want of funds, further worsening our situation as an import-dependent nation with the attendant negative impact on economic indices.

For failing to properly weigh the costs and benefits of this decision, the lending banks and the arrangers have now found themselves in a deep mess. They have realised they have been taken for an unpleasant ride. And that Etisalat Nigeria merely served as a conduit for the foreign firm to skim off depositors’ money as there is no proof that the fund was applied to the desired end. The banks are said to be seeking to enlist the support of the Economic and Financial Crimes Commission (EFCC) rather than considering how to get the International Police (Interpol) to investigate the transnational crime. The Central Bank of Nigeria (CBN) also shares in the blame for failing to detect this rot early enough and nip it in the bud.

Also difficult to fathom is, whether or not the loan to Etisalat Group was guaranteed. The lender banks should have insisted that such a huge credit be guaranteed by the governments of UAE or that of Abu Dhabi State given their interests in the controversial firms. The UAE government owns 60 per cent of the shares of Etisalat Group while the rest were publicly traded.  Mubadala Development Company is an investment company of the Abu Dhabi State government. It is surprising that leaders of both UAE and Abu Dhabi State have done nothing to stop the management of these companies from defrauding Nigeria

Our kith and kin out there in UAE are treated no better than criminals. They neither can own nor operate bank accounts following government’s fiat, let alone secure a bilateral loan. The excuse for precluding Nigerians from operating bank accounts there is the activities of a few unscrupulous elements.  But here, we literally shut down our banks to fund just one UAE company run by those that lack respect for a contract which they voluntarily entered. The N541 billion credit extended to Etisalat Group can set up well over 20 banks in Nigeria. The capital base of banks in Nigeria is still N25 billion.

The Etisalat debt saga is only a microcosm of how foreign investors rip our nation off and leave our economy in distress. Rather than bring in the much sought after Foreign Direct Investment (FDI) to shore up the economy, the so-called foreign investors come with the intention of defrauding the country and exploiting its populace. They all arrive on the Nigerian scene with empty suitcases. Then, with the aid of a Nigerian arranger, who has a personal stake, they go cap in hand to our local banks asking for depositors’ money, which they readily get.

The local deposit banks will hurriedly pool resources together to meet their outrageous demands as in the case of Etisalat. More often than not, the credit advanced to the foreign firms disappears without a trace. When the fund is applied here, the populace is exploited and the proceeds repatriated to the various home countries of the foreign investors. The other telecoms service providers owned by foreigners were similarly funded through syndicated loans from depositors’ monies and today they are posting huge profits, which are stashed away in their respective countries or Swiss banks.

Indeed, this incident portrays the disservice the Nigerian financial institutions and CBN are doing to the country. These institutions have a penchant for turning foreign firms that are worth nothing in their respective countries into instant successes as soon as they step onto Nigerian soil using depositors’ funds. And with the billions of naira or dollars secured from the banks, juicy and inflated contracts get awarded to them by corrupt public officials entrusted with public procurements.

Those dubbed celebrities fall over themselves to act as their ‘ambassadors’ or whatever they call them. The mass media will follow up and brand the companies ‘giants’. Most of the so-called telecoms giants, construction giants, and what have you were all pigmies before arriving here.

They achieved greatness through local deposit banks and contracts in which due process is circumvented.  In turn, these foreign companies reward Nigeria by enslaving her people. Their contribution as corporate citizens of Nigeria does not go beyond turning the country into a nation of dancers, singers, and clowns through all manner of reality shows targeted at youths, who represent the future of our country.

There is absolutely no reason those involved in this latest show of shame should not be arrested and tried for economic sabotage. The boards and managements of the 13 financial institutions as well as the arranger of the N541 billion credit should be clamped into detention. In civilised societies, such characters will not be walking about as free men. They certainly will be in detention waiting to face the highest penalties for financial crime in the land.

This debacle is the price we pay for allowing those who hardly can tell their left from their right to toy with the destiny of our nation in the name of managing financial institutions. Almost all Nigerian banks have been reduced to family businesses with sons succeeding fathers. The only qualification of the successors being the huge investment made in the banks by their fathers.  For some others, the qualification is the cheap publicity they court from local and foreign media. How many of those who parade themselves as chairmen and managing directors of Nigerian banks know the rudiments of management, banking, finance, or economics?

It is time Nigerian banking laws are strengthened to bring intellectual resources to bear in the management of these institutions. The credentials of those aspiring to run our banks or head certain departments of banks including treasury, foreign exchange, risk management and legal must meet internationally accepted standards to reverse the negative consequences of their decision on our economy. Otherwise, we will continue to grow other economies at our own peril.
Dr. Nnadi, a former editor and member of editorial boards of a number of national dailies, wrote from Owerri, Imo State.

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