Connect with us

Business

Access Bank Eurobond Paves Way for Nigeria Funding

Published

on

Access Bank
  • Access Bank Eurobond Paves Way for Nigeria Funding

Relief may soon come the way of Nigeria’s foreign exchange-starved economy, following the successful raising of $300 million by Access Bank Plc via a Eurobond from the international market recently.

The acceptance of the bank’s offer is expected to spur other Nigerian lenders to raise dollar-denominated debt, as well as pave the way for the federal government’s proposed $1 billion Eurobond issue expected to be floated before the end of the year.

In addition, it is expected to result in improved inflow of foreign exchange into the economy, thereby boosting economic growth.

The Access Bank issue has a maturity date of October 2021 and a coupon rate of 10.5 per cent. The Eurobond issue made the bank the first Nigerian lender to raise a bond from the international market since 2014, despite the country’s macroeconomic headwinds.

The bank said the successful outcome of the bond demonstrated its strength, resilience and international endorsement.

Indeed, it has also helped in strengthening confidence in the Nigerian banking system as well as the economy in general.

Fitch Ratings recently warned that the sharp rise in the level of non-performing loans (NPLs) in the Nigerian banking industry, as a result of the tough macroeconomic environment could lead to the downgrade of the financial institutions. Banking sector NPLs rose to 11.7 per cent at the end of June 2016.

Fitch also expressed concern about weakening capital adequacy ratios for banks.

Also, the Central Bank of Nigeria (CBN) had said it was expecting continued deterioration across banks’ oil and gas portfolios during the second half of 2016, as the sector faces sustained low oil prices and production disruptions.

Accordingly, tapping from the Eurobond market would help bolster banks’ capital bases and put them in a position to finance big-ticket deals in Africa’s largest economy with wide infrastructure deficit.

On the sovereign debt, the Finance Minister, Mrs. Kemi Adeosun, at the weekend expressed optimism that the $1 billion Eurobond would be issued before the end of the year.

The issue is part of Nigeria’s plans to borrow a total of N1.8 trillion from abroad and at home to fund an expected budget deficit of N2.2 trillion this year.

“We are appointing parties this week, we are hoping it will come before the end of the year. We have the headroom and we are very fortunate in that regard, we have a very low debt to GDP ratio,” she said at a London conference.

Adeosun informed her audience that Nigeria had started a journey, which would take its economy from being dependent on oil as a primary commodity, to a more productive economy.

To the chief executive of Financial Derivatives Company Limited, Mr. Bismarck Rewane, the move by Access Bank would be positive for Nigeria’s quest to raise debt.

Rewane explained that the Eurobond issue by Access Bank was a strategic initiative. According to him, Access Bank has franchises across various jurisdictions and so runs a multi-currency balance sheet.

“Therefore, Access Bank’s move was strategically related to the bank. But the fact that Access Bank has its headquarters in Nigeria doesn’t mean the funds would be used entirely in Nigeria.

“Access Bank is addressing its own capital adequacy requirements so that it would continue to meet the regulatory requirements in markets where it is operating such as in the United Kingdom and across Africa.

“Access Bank is fully aware that the rating agencies have had concerns about the soundness of the Nigerian banking system. So going ahead at this time to raise funding, shows the versatility of Access Bank, its depth and courage. So that by the time they have maturing obligations in dollars, they would not only have adequate capital, they would have the liquidity to meet those obligations without undermining the bank’s credibility.

“I think it was a wise move. Will it have some effect on Nigeria? Yes, it will. If a Nigerian bank succeeds, that means the Nigerian economy can succeed also in its issue. So it would have positive effect on Nigeria,” Rewane said.

Another financial market analyst noted that with the high cost of raising funds in the domestic economy, a Eurobond issue would be a succour for both the federal government and corporates.

“This would help shore up their balance sheets and maximise their capacity to join loan syndication clubs,” he said.

“There is a lot of cash with investors in Europe and America looking for where to invest,” the source who pleaded to remain anonymous said.

Clearly, the federal government and other corporates that seek to turn to the Eurobond market could ride on the coattails of Access Bank by taking advantage of lower borrowing cost to respectively fund the budget deficit for infrastructure projects and bolster their balance sheets.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Company News

Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

Published

on

Guinness - Investors King

Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

Continue Reading

Business

Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

Published

on

Private employers

As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

Continue Reading

Business

Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

Published

on

Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending