Nigerian banks still trying to recover from an economic contraction in 2016 now face a triple whammy of coronavirus, plunging oil prices and volatile markets that could further delay progress, Bloomberg News reported. The 2014 collapse in crude dried up foreign exchange in Africa’s biggest producer of the commodity, resulting in the first recession in 25 years and a currency devaluation. Businesses struggled to make repayments, heaping piles of toxic loans onto the books of lenders.
RT Briscoe (Nigeria) Plc is finalising arrangements to raise new capital to pay its burgeoning debts and improve working capital as the automobile company struggles to stave off insolvency, The Nation reported. In a regulatory filing at the Nigerian Stock Exchange (NSE), the board of the company stated that it was finalising arrangements for an open-ended actively managed fund to raise funds from the capital market. The net proceeds of the fund raising will be used to settle existing liabilities and increase working capital.
After months of forcing lenders to extend more credit, Nigeria’s central bank last week stunned markets with a measure that could result in the opposite response, Bloomberg News reported. Governor Godwin Emefiele increased the percentage of deposits that lenders need to park with the regulator -- and which doesn’t earn interest -- by 500 basis points to the highest level in more than four years. By upping the cash reserve requirement to 27.5%, the central bank is draining lenders of the funds they would typically use to create loans.
A consultancy firm that allegedly arranged a fraudulent $184 million loan announced by Nigerian oil company Lekoil Ltd said on Wednesday that it welcomed an investigation into the matter, Reuters reported. Shares in Lekoil Ltd fell by more than 70% following a suspension of trading after the firm discovered the loan was fraudulent. Lekoil had suspended trading of its shares on the London Stock Exchange on Monday after finding that the $184 million loan it had announced from the Qatar Investment Authority was a “complex facade” by individuals pretending to represent the QIA.
Shares in Lekoil crashed by more than 70 per cent on Tuesday as investors responded to news that the Nigeria-focused oil producer had paid $600,000 in fees for a $184m loan that did not exist, the Financial Times reported. The Aim-listed company, which Mark Simmonds, the UK’s Africa minister under David Cameron, recently joined as a non-executive director, will now have to find alternative financing from shareholders to fund the development of its key asset, the Ogo field in Nigeria.
Nigerian President Muhammadu Buhari is due to complete his second and final four-year term in 2023 and the battle over who will succeed him is already heating up, placing further pressure on an already strained economy, Bloomberg News reported. Buhari has thus far shied away from endorsing his deputy, Yemi Osinbajo, for the position, twice slighting him by opting not to transfer power to him while traveling abroad. That may diminish his chances of securing the top job.
Nigeria’s banking industry is opening the lending taps to avoid penalties, bowing to central bank demands to unlock credit to help revive the economy, Bloomberg News reported. Banks raised their loan-to-deposit ratio to 64% in the third quarter, one percentage point shy of the minimum target imposed by the central bank, according to Bloomberg calculations using quarterly banking data released by the National Statistics Bureau. The monetary authority gave banks until the end of the year to meet the threshold or hand over half of the shortfall to the central bank without earning interest.
Nigerians are set to become poorer for the fourth year in a row, with economic growth, estimated by the IMF at 2.3 per cent, undershooting the 2.6 per cent increase in population, the Financial Times reported. The fund does not see this scenario reversing before 2022, a grim prospect for the 200m people in a country whose gross domestic product per head is a little over $2,000. Despite lower global prices, the oil sector has made modest progress this year. Production is up thanks to the Egina oilfield coming on line and fewer acts of sabotage by militants in the Niger Delta.
A judge in London said on Friday he would grant an Irish-owned company the right to seek to seize some $9 billion (€8.1 billion) in assets from the Nigerian government over an aborted gas project, The Irish Times reported. Process and Industrial Developments Ltd (P&ID) was awarded $6.6 billion in an arbitration decision over a failed project to build a gas-processing plant in the southern Nigerian city of Calabar. With interest payments, the sum now tops $9 billion – some 20 per cent of Nigeria’s foreign reserves.
The collapse of the oil price that began in 2014 was bad news for Nigerian banks, The Economist reported. A quarter of their lending was to oil and gas firms. Many businesses were left reeling after a currency crisis. The economy stuttered, then plunged into recession. Before the oil slump just 3% of loans were not being paid back. By 2017 some 15% had gone sour. The oil shock underscored an old truth: in choppy waters, it helps to be a big ship. The country’s large banks made tidy profits and now sit on sufficient capital.