By Doris Uche
According to reports by Premium Times, Reuters and several online news outlets, the curtain appeared to have finally fallen on the long drawn-out Etisalat Nigeria bankruptcy saga, with Access, other local and foreign creditor bankers of the troubled telecommunications company poised to take over the management of the company on Thursday, June 23, 2017 through the United Capital Trustees Limited, which is the legal representative of the consortium of banks. The take over is as a result of Etisalat’s inability to reach agreement with the creditors on the restructuring of a whopping debt of about N541 billion, which has been outstanding for quite a long time.
However ThisDay has today reported that: «Just like the Nigerian Communications Commission (NCC), the leadership of the Central Bank of Nigeria (CBN) has informed the 13 banks that extended a $1.2 billion facility to Etisalat Nigeria that it would resist the move by the lenders to take over the network operator without its express approval.
This was the fallout of a meeting held between CBN officials and the CEOs of the 13 banks Wednesday in Abuja.
Citing the Nigerian Communications Act (NCA), the NCC on Tuesday had stepped into the crisis that has enveloped the country’s fourth largest network operator, reminding the banks that they could not take over Etisalat’s operating licence without its approval.
Aligning with the NCC, a reliable central bank source, who spoke to THISDAY Wednesday, said the Board of the CBN would not support any “hostile takeover” of the telecoms company due to its indebtedness to the banks.
According to the source, the attempt by the banks to take over Etisalat clearly jeorpardises the federal government’s effort to attract Foreign Direct Investments (FDI) into Nigeria’s ailing economy. »
Sad as the outcome of Etisalat’s valiant battle to save its self may be, the purpose of this article is not to dwell on what comes next for the telecommunications company but to draw attention to a tangential issue with a much wider ramification for the Nigerian economy and the institutions that have been set up to monitor and generally oversee the activities of the country’s strategic economic agents: the telecommunications companies and the Banks.
More specifically the thrust of this article is to focus on the questionable and ultimately futile efforts of the Nigerian Communications Commission, NCC, and the Central Bank of Nigeria, CBN, to save Etisalat Nigeria from its present fate.
As is well known, the mandate of the NCC is to regulate the activities of telecommunication entities in the country while that of the CBN is, inter alia, to do the same with the banks and other financial institutions. The purview of both institutions does not and should not extend to interfering with and trying to override the important financial and business principles under which economic agents are required to operate in the country.
While NCC should be concerned with and encourage the rehabilitation and expansion of Etisalat’s paucy network in Nigeria, it should never have been nor should it ever be involved in trying to save Etisalat or any other company from the financial mess in which they find themselves.
Etisalat and all other companies in the telecommunications sector of Nigeria have been facing the same harsh economic conditions that Etisalat has been giving for its inability to meet its financial obligations. These other companies have, with the support of their shareholders, managed to weather the storm and to meet their financial obligations. If Etisalat’s shareholders, who are known to be financially capable of bailing out the company, have chosen not to do so, why should the NCC take it upon itself to help them out?
What is the rationale of NCC imposing and sustaining a crippling fine on MTN, which the company is still grappling with, and against all logic turning around to try to help Etisalat to evade its financial obligations?
The new argument being advanced by NCC on the need for its approval for transfer of Etisalat’s licence, if that would ultimately need to be the case, is a ruse that should not be accepted, as the banks have not sought for such a transfer. Their aim has been to take over the management so as to ensure repayment of their loans to Etisalat. This is a normal measure on which loan advances such as those made to Etisalat are structured. Where was the NCC when the loans were being contracted on this basis ?
Where the interference of NCC was clearly inappropriate and uncalled for, that of the CBN is worse. Here is an institution, the CBN, that is supposed to ensure that the principles of sound banking, which the CBN itself has been known to zealously enforce, going out of its way to undermine one of its foremost fundamental principles: pay your debt or forfeit control of the asset you have given as collateral.
CBN’s ridiculous argument that enforcing the terms of the loan contract would discourage foreign investors from investing in Nigeria turns logic on its head. Some of the creditors of Etisalat are foreign investors who must now be regretting their ill advised foray into an investment environment in which the statutory organ that has oversight on the enforcement of the terms under which bank loans are granted, is now the very same organ that is bent on underming the adherence of debtors to those terms.
Contrary to the lame excuse being given by CBN for its intervention, potential foreign investors would be scared to come and invest through our country’s banking system, knowing, as they now do, that the CBN is on standby to protect defaulting debtors rather than the foreign investments.
Still on the matter of default, one wonders why the CBN did not intervene in the take over of ARIK by local creditor banks, which are now running the airline. Or is the non intervention due to the fact that only local investors were involved?
The CBN is well known for quickly bringing down the hammer on erring banks, but in the case of Etisalat the hammer of the CBN has been brought down on the creditor banks’ ability to stay afloat; under the delaying constraints on debt recovery being imposed by the CBN; outside its statutory mandate.
Given the harm being done to potential foreign investments as well as the pernicious delay and resultant losses that the banks are suffering, as a result of the illegal and harmful interference of the NCC and CBN in the Etisalat debt impasse, it would, in my view, be necessary for the government to warn both institutions to refrain henceforth from meddling in a questionable manner in matters that are well beyond their mandates.
Doris Uche wrote from Abuja and can be reached on DU.Current@gmail.com