Interest Rate: 12 Nigerian Banks Borrow N9.81trn from IFC, ADB, CBN, Others in 3 Years

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Following availability of funds at single digit interest rate, a total of 12 banks borrowed a whooping N9.81trillion from international finance institutions, Central Bank of Nigeria (CBN), among others, between 2018 and 2020.

Banks operating in the country have continued to borrow from international financial institutions such as International Finance Corporation (IFC), African Development Bank, JP Morgan Securities Limited, among others to finance key projects in Nigeria and Africa countries where they operate.

The banks also access facilities such as Shared Agent Network Facility (SANEF), Non Oil Export Stimulation Facility (NESF), Anchor Borrowers’ Fund, Economic Recovery Fund (ERF), among others from CBN to support targeted sectors.

THISDAY investigation revealed that United Bank for Africa Plc (UBA) leads Tier-1 banks chart in borrowing from these international finance institutions and CBN followed by Zenith Bank Plc and Access bank Plc.

On the flipside, Unity bank Plc borrowing from the CBN leads the Tier-2 banks chart.

Other banks that have access funds from these international financial institutions and CBN are; Access Bank Plc, Zenith Bank Plc and FBN Holdings Plc.

Others are; Fidelity Bank Plc, FCMB Group Plc, Union Bank of Nigeria Plc, Stanbic IBTC Holdings, Wema Bank Plcand Sterling bank Plc.

THISDAY checks revealed that in the last three years, UBA’s recorded a long/short term borrowing of about N2.14trillion from Eurobond debt security, ADB, Proparco, JP Morgan Securities Limited, Agence Francaise de Development (AFD)l, African Export-import Bank, CBN, among others.

The breakdown of UBA’s long/short term borrowing revealed that, a total of N694.4billion was borrowed in 2020 compared with N758.68billion and N683.53billion in 2019 and 2018, respectively.

The Pan-African bank in November 2021, invited interests from holders of its $500 million Eurobond due for maturity in 2022 for redemption ahead of time through a cash tender offer before issuing $300 million similar note.

Amid global and domestic challenges, the bank noted that its $300 million Eurobond had attracted 1.7 times oversubscription from investors across the globe.

Analyst at PAC Holdings, Mr. Wole Adeyeye noted that UBA needed to borrow from these international finance organizations to meet its lending demands in the continent.

He noted that the bank’s accessing these facilities showed the confidence foreign investors have in the management of the bank.

He added that:“ The borrowing of UBA from IFC, among others is a profitable move for the management. It tends to boost liquidity and gives the bank more capability to lend to targeted sectors.”

On its part, Access Bank has in the last three years have borrowed a sum of N1.77trillion from ADB, Netherlands Development Finance Company, French Development Agency among others.

The lender has also accessed local facilities such from Development Bank of Nigeria (DBN), Real Sector Support Facility (RSSF), Real Sector Support Facility (RSSF) Differentiated Cash Reserve, among others.

Access Bank in 2020 reported N791.45billion borrowing from CBN’s facilities, international financial institutions, among others from N586.6billion reported in 2019. The bank had reported N388.4billion short/long term borrowings.

Access Bank in 2020 announced N142.91billion or $356,974,352 that represents the outstanding balance in the on-lending facility granted to the Bank by the Netherlands Development Finance Company effective from March 2018 ($100million), Feb 2019 ($162.5million) and 2020 ($93.8m)for a period of 5 years, 10 years and 10 years respectively.

The bank in 2020 financial year report and accounts for period ended December 31, 2020 said: “The principal amount is repayable semi-annually from July 2019, quarterly from May 2019 and January 2026 respectively while interest is paid semi annually at 5.5 per cent above six months LIBOR, quarterly at 7.83 per cent above three months LIBOR for the first five years and 12 per cent above three months LIBOR for the last five years and quarterly at 9.61 per cent.

It also includes the facility granted to Ghana in July 2018 for a period of seven years at 6.88 per cent with interest and principal (starting June 2023) payable semi-annually.

“Two facilities were also granted to Congo in Dec 2019 for a period of 5 and 3 years respectively with the principal amount repayale semi-annually from Jan 2022 and Jan 2021 respectively while interest is paid semi annually at 4.2per cent above LIBOR and four per cent above LIBOR respectively. From this creditor, the bank has nil undrawn balance as at 31 December 2020.”

For Zenith Bank, it borrowed N1.63trillion with a breakdown of N870.08billion in 2020 and N322.48billionin 2019 Zenith bank had reported N437.26billion borrowing in 2018.

While FBN Holdings reported N968.29billion borrowings, GTCO reported N455.46billion in the last three years.

According to THISDAY findings, the highest amount borrowed by GTCO was N30.23billion in 2020 financial year from IFC.

The bank explained that: “The amount of N30.23billion or $73,698,000 (December 2019: N43.88billion or $143,686,000 represents the outstanding balance on the Tranche 4 and Tranche 5 dollar term loan granted to the Parent by the IFC.

The Tranche 4 facility was disbursed in December 2011($170,000,000) for a period of 8 years and the Tranche 5 was availed in December 2014 ($175,000,000) equally for a period of 8 years. The principal amount is repayable semi annually from December 2013 for Tranche 4 and December 2016 for Tranche 5.

“The pricing of the Tranche 4 facility is 5.5per cent and Libor plus 4% for the Tranche 5. Interest is paid semi annually on the two tranches.”

Other banks short/long term borrowing from CBN’s facilities and international financial institutions in the last three years include: Fidelity bank- N753.2billion; FCMB Holdings- N401.79billion; Union Bank of Nigeria-N389.04billion; Stanbic IBTC Holdings-N274.11; Wema bank-N167.74billion; Unity Bank;N574.38billion and Sterling Bank- N288.6billion.

The Vice President, Highcap securities, Mr. David Adnori said banks needed to access these funds from international financial institutions and CBN’s facilities to boost earnings and expand their lending to critical sectors.

He noted that most monetary agencies prefer to lend these funds to banks, given their track records in Africa, most especially in Nigeria where they thrive in challenging operating environment.