2008 KNOCKING ON THE DOOR OF FINANCE IN NIGERIA?

In the year 2008, just about nine years ago, a major crash occurred in the world of Nigerian finance partly as worldwide crash also occurred.

It took so many moves and the creation of Asset Management Company of Nigeria before Nigerian banks and by immediate extension, the Nigerian capital market could survive the storm.

Now, with the economy getting  oh so slowly out of recession, is year 2008 knocking on the door again?

Unfortunately, the answer is yes. It has in fact been knocking on the door since 2016 dive into economic recession and all it has been waiting for is one major can't pay, won't pay and the door will be kicked open.

Simple: Most Nigerian banks have since last year been struggling to accommodate increasing number of potential toxic loans especially those extended to the oil and gas industry hit by militancy, end of petroleum subsidy regime, birth of interbank market amidst chronic scarcity of foreign currency and inflation driven high cost of operations.

The fear actually was that the kick on the door may come from one of upstream or downstream companies refusing to pay because they can not pay. Fortunately, crude oil price had a breather and possibility of won't pay can't pay began to recede.

Then suddenly, Etisalat's crushing loan burden became impossible to service and quietly, at first, all concerned sat down to renegotiate.

But it was hard for all to be on the same page. So, Etisalat's largest shareholders, UAE's Mubadala Development Company pulled out of the company and negotiations, giving banks its own rights to take over Etisalat.

Of course, this was not going to be an easy thing to do. In the first place, the outstanding loan estimated at $1.2bn was huge enough to send many of the 13 banks involved in the syndicated loans crashing.

Oh sure, the banks could move, strip the assets and do anything possible to recover as much as possible but that will not be close to the amount outstanding.

Not to talk of the jobs to be lost and millions of mobile phone subscribers who will be disappointed.

But let no one be fooled, Etisalat is worth rescuing only because if allowed to fail, that may be just the kick on the door for 2008 to repeat itself in Nigerian finance.

So, it is nice to hear that the Central Bank of Nigeria and Nigerian Communications Commission have decided to step in and help all parties negotiate a possible win-win arrangement.

According to CBN spokesman, Mr Okorafor, the apex bank "believes that Etisalat is a systematically important telecommunication company with over 20m subscribers that if not well handled may have domino effect on the banking system itself"

True talk but let it be appreciated by government agencies and indeed, all governments hungry for funds in these times, that no matter how right laws and government policies are, delicate handling in tough times is always necessary.

In the case of Etisalat, it is now left for the CBN and NCC to ensure that its can't pay does not turn out to be the kick year 2008 has been waiting for to re-emerge in 2017.

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