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Nigerian businesses borrow N1.59trn in 4 months

By on April 30, 2013

Businesses in Nigeria have borrowed over N1.59 trillion from both local and international banks through syndicated loan deals, since the beginning of 2013, according to reports from Reuters released yesterday.

This, according to the report, was driven by a growth in confidence among international banks as Nigeria makes effort to address transparency and credit risk concerns.

The report stated that MTN Nigeria became the latest borrower, when, a couple of days ago, it agreed a $3 billion (N477 billion) loan deal with Guaranty Trust Bank, Citigroup , Standard Chartered, Industrial and Commercial Bank of China, China Development Bank and China Construction Bank, to expand its network.

Meanwhile, Dangote Group, West Africa’s largest conglomerate, is in talks to raise $3.5 billion loan to fund fertiliser and oil refinery projects with lead banks Barclays, Guaranty Trust Bank, Standard Bank and Standard Chartered.

It maintained that the two loans combined, almost matched the $7.96 billion (N1.266 trillion) Nigerian businesses raised throughout 2012, which is the country’s highest-ever annual loan volume

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.

Commenting on the increasing loan deals in Nigeria, a London-based banker who chose not to be named said, “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 not ignore Nigeria.

“Borrowers start getting into a finite space for tenors of five years or more, even for a strong credit. One thing that may get the deal get through is the Africa growth story.

“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.

“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.

“It is not just four international banks in Nigeria any more, consisting of ABSA, Citigroup, Standard Bank and Standard Chartered. There are at least 15 strong international banks that are keen to do deals now,” a fourth London-based banker said, citing French lenders such as Societe Generale and Natixis

Reuters stated that 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 co-ordinators Citigroup and HSBC.

It maintained that 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.