" />
Published On: Mon, Jun 26th, 2017

Etisalat crisis drags market to three week low


The crisis between telecommunication company, Etisalat Nigeria, and a consortium of 13 commercial banks over a $1.2 billion loan has dragged the All Shares Index (ASI) down to its lowest value in the past three weeks. The problem has knocked the wind from the markets sail as investors begin to take profit from their banking sector positions. The ASI and market capitalization dropped-4.99 percent week-to-date to 32,122.14 and N11.11 trillion respectively; this was their lowest values since June 2, 2017 when the ASI and market capitalization closed at 31,371.63 and N10.85 trillion respectively.

Source: NSE/Business Hallmark

Source: NSE/Business Hallmark


The price of Brent Crude declined -3.24 percent to close at $45.39 per barrel last week due to glut, making investors worried about the stability of the Nigerian economy, which has been in recession since the first quarter of 2016, but was showing signs of recovery when oil price started appreciating and climbed to almost one and a half year high of $57.10 on June 1, 2017.

Investors expressed their apprehension when news broke that Etisalat Nigeria’s largest shareholder, which is based in the United Arab Emirates, Mubadala Development Company was pulling out of the company after talks to restructure its $1.2 billion debt to a consortium of 13 quoted local banks fell through. The panic that accompanied this planned pull-out made the banking index dip -6.78 percent to 386.53 on Friday from 414.65 on June 16, making it the highest drop among the various sectors listed on the exchange.

Source: NSE/Business Hallmark

Mr Johnson Chukwu, Managing Director, Cowry Assets Management Company Limited, asserted the stock prices of banks exposed to Etisalat Nigeria declined because discussions between them and the telecom company collapsed and regulators prevented the lenders to take over its operations.

“It is expected that these banks would make additional loan provisions to accommodate this delinquency, so the market is pricing this provision and this affected their share prices,” he explained.

He stated further that the stock market gauges current performance and outlook, so, it would respond to any factor that would affect the economy.

READ  Emefiele dismisses fears over MPC meeting, insists economy is strong

“The   drop in oil price that at some point was below the $44.5 benchmark would ordinary affect the market performance,” he claimed, “good a thing was that the price of Brent has moved above the benchmark price.”

Mr Pabina Yinkere, analyst with Vetiva Capital Management Limited believed it was the decline in oil prices and some profit taking that caused the capital market to run into a bearish mode last week.

“Oil prices are weakening and you know how sensitive the Nigerian economy and market are to oil prices that could have been one of the reasons the stock market was bearish,” he opined, “The market has rallied since mid-April, I think it was time for some profit taking.”

Yinkere argued that the Etisalat loan was only about 2 percent of the total loan portfolio of the affected banks, making it insignificant to be able to cause their share prices to be adversely affected.

Access Bank, Zenith Bank, Guaranty Trust Bank, First Bank of Nigeria, Fidelity Bank, First City Monument Bank (FCMB), Stanbic IBTC, Ecobank, United Bank for Africa (UBA) Plc and Union Bank of Nigeria Plc formed the consortium of commercial lenders that gave Etisalat Nigeria a $1.2 billion facility for the payment of the telecoms foreign loan and also for the expansion of its network.

Three of these banks were among the 10 highest losers last week.

Jaiz Bank Plc, Diamond Bank Plc, FBN Holdings Plc and FCMB Group Plc were among the 10 top losers during the week, shedding -17.98 percent, -15.04 percent, -14.51 percent and -12.50 percent respectively between Monday and Friday.

Neimeth International Pharmaceuticals Plc (N0.68), AshakaCemPlc(14.07) and Livestock Feeds Plc. (0.91 1) were top gainers, appreciating 44.12 percent, 21.39 percent and 20.88 percent respectively week ended June 23, 2017, while Transnational Corporation Of Nigeria Plc(1.86) -23.12 percent, Jaiz Bank Plc(0.89)and Fidson Healthcare Plc(3.30)were the top losers, shedding -23.12 percent, -17.98percent and -16.67percent of their value.


The Etisalat debacle has been seen as a mix of poor capital planning, weak credit management and dodgy corporate objectives. The company was propped for crisis as far back as 2015 when it took a loan of slightly under $2 billion to overhaul its operations and install further infrastructure. The problem was that business met greed. The owners of the company leveraged its cash flow to live lives of barons. They quickly consolidated a jet set mentality that wrongly interpreted the easy popularity of etisalat among young Nigerians as a free pass to a life of exuberant luxury. Ultimately poor service quality, vendor indebtedness and reneging on payment agreements with technical partners saw the company collapse like a poorly made soufflé. The company’s chairman Keem Bello-Osagie is not new to such fumbling business practices as he was embroiled in a similar challenge as chairman of UBA in the 1990’s.

READ  NBS: 77.5m Nigerians engage in economic activities in Q3

The lending banks themselves were not without blame as their credit appraisal mechanisms failed to point out the obvious overleveraged position of etisalat. The company’s emergent cash flow position confused or perhaps more accurately seduced credit analysts to ignore the company’s weak ‘free cash flow’, its huge capital expenditure and its thinning networking capital. In sum etisalat was a ticking bomb waiting to explode. The hubris of the banks has, allegedly, had adverse impact on their stock prices as several bank stock prices tumbled over the week on heavy trading and profit taking.

Etisalat, which started operations in Nigeria in 2009, was given a unified access license, including a mobile license and spectrum in the GSM 1800 and 900 MHZ bands from the NCC in January 2007.

The Nigerian Communications Commission (NCC) ranks the Telco as Nigeria’s fourth largest telecoms operator, with about 21 million subscribers or about 12.9 percent of the telecom market service delivery space as at January 2017.

MTN holds 40 percent market share with about 60million subscribers; Globacom, 37million subscribers, or 24.6 percent of the market and Airtel 34.6 million subscribers or 22.8 percent.



Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • FG grants PPAs of 14 solar projects another 6 months extension

    For the second time since 2016, the Federal Government  has extended by another six months, the deadline for the execution of the power purchase agreements (PPAs) it signed with investors for 14 utility solar power projects to be built in some states of the country. According to OGN reports it was reportedly rolled over after […]

  • Dangote Sugar targets 25% sales volumes in 2018

    The acting Managing Director of Dangote Sugar Refinery Plc, Abdullahi Sule, believes the company’s  sales volumes could rise as much as 25 percent in 2018 after last year’s downturn. Nigeria’s economy, which contracted in 2016, is recovering after the government relaxed some currency controls implemented after the price of oil, its main export, crashed in […]

  • Emefiele dismisses fears over MPC meeting, insists economy is strong

    The Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has allayed the fears of Nigerians and the international community over the inability to hold the meeting of the Monetary Policy Committee (MPC) for January. A statement signed by Emefiele in Abuja on Monday, said that the meeting, which was earlier scheduled for the day […]

  • Nigeria, Angola crude overhang could pressurize Asian crude

    Traders have said that unsold barrels of crude from West Africa could put pressure on the premiums of Malaysian crude cargoes for March loading.   Platts reports that weaker demand, particularly from independent refineries in China, for February-loading Angolan and Nigerian grades has resulted in an overhang, traders said. Traders indicated that these grades were […]

  • NBS: 77.5m Nigerians engage in economic activities in Q3

    The National Bureau of Statistics (NBS) says 77.55 million people are engaged in economic activities out of a labour force of 85.08 million in the third quarter of 2017. The NBS disclosed this in a “Labour Force Statistics Volume 2: Employment by Sector report for Third Quarter of 2017’’ released by the bureau on Monday […]

  • Lassa fever: Schools reopen in Ebonyi

    Public and private schools in Ebonyi shut on Jan. 18 to check the spread of Lassa fever outbreak in the state have reopened the News Agency of Nigeria (NAN) reports. Prof. John Eke, the Commissioner for Education, told NAN on Monday in Abakaliki, that the schools were reopened as no new case of the disease […]

  • Four major markets in Nigeria need 36.27MW to grow efficiency – REA

    A baseline survey of the energy needs of four of the major markets in Nigeria, which the Rural Electrification Agency (REA) conducted, has indicated that with 36.27 megawatts (MW) of stable electricity provided to them, economic productivity in the markets could expand and bring more prosperity to about 50,900 shop owners there, OGN reports. The […]

  • ALSCON: Nigeria, Russia sign Share Purchase agreement

    Nigeria has signed the Renewed Share Purchase Agreement with Messrs UC Rusal of Russia in respect of the Aluminium Smelter Company of Nigeria (ALSCON). The agreement was signed in in Abuja on Friday by the relevant government stakeholders, including the Minister of Mines and Steel Development, Dr Kayode Fayemi. Present at the ceremony were the […]

  • Slimming drugs: Expert calls for stiff regulation

    Dr Bamidele Iwalokun, a medical researcher with the Nigerian Institute of Medical Research (NIMR) in Yaba, Lagos, has called for stiffer regulation of slimming drugs to safeguard the health of consumers. Iwalokun made the call in an interview with the News Agency of Nigeria (NAN) in Lagos on Sunday. He said there was the need […]

  • Derivatives trading: US expert speaks on the pluses and pitfalls

    As part of strategic initiatives to enhance the efficiency of capital market operations in Nigeria, The Nigerian Stock Exchange and Coronation Merchant Bank invited the former Chair of the US Commodities Futures Trading Commission (US CFTC), Mr. James Stone to deliver a special lecture on ‘Pluses and Pitfalls of Derivatives Trading’ at the Nigerian Stock […]

  • Ajimobi: Oyo set to increase institutions subventions

    The Oyo State Governor, Abiola Ajimobi, has appealed to the striking state-owned higher institutions that his administration is prepared to increase their subventions. The governor said this would be achieved as soon as government’s renewed efforts to improve its revenue-base begin to bear fruits. Ajimobi, who made the appeal while inaugurating the governing councils of […]

  • SEC’s e-dividend free registration ends Feb 28

    The Securities and Exchange Commission (SEC) has extended period for the free e-dividend registration to Feb. 28, to encourage more shareholders participation in the initiative. The commission in a statement obtained by the News Agency of Nigeria (NAN) in Lagos, indicated that the extension was part of its developmental role. It said that the extension […]

  • Nigerian equities market goes bearish after hitting over nine year high

    FELIX OLOYEDE Profit-taking caused the Nigerian Stock market to go bearish for the first time this week after reaching over nine year high on Wednesday. The All Share Index declined -0.08 per cent to close at 44,848.74 point on Thursday after hitting 44885.24 point the previous day, the highest since September 2008 when it closed […]

  • 2019: Wike gets second term endorsement

    Residents of River state have endorsed the Governor, Nyesom Wike, for another term of four years. They declared their support for the governor when over 15,000 non-indigenes of the state visited the Government House on Wednesday in Port Harcourt, the state capital, Channels TV reports. Wike urged Nigerians irrespective of their linguistic and religious affiliation […]

  • Banks enjoy improved liquidity as overnight rate drops three consecutive days

    FELIX OLOYEDE The redemption of Treasury Bills by Federal Government has helped to improve liquidity in Nigerian banking sector as overnight rate declined three consecutive times this week. Overnight (O/N) rate dropped -0.75 per cent to 5.75 per cent on Thursday, while Open Buy Back (OBB) rate was down -0.92 per cent to 5.25 per […]

  • Lassa fever: Ebonyi Schools proceed on forced break

    Schools in Ebonyi State have been directed to close for a week following the outbreak of Lassa fever in the state. The state government said the directive was given as part of measures to contain the spread of the disease in the state. Commissioner for Health, Umuzuruike Daniel, also confirmed the death of three victims […]