Update: Banks May Forgive 9Mobile $1.2Bn Debt Soon

There are indications that 12 indigenous banks involved in the $1.2 billion 9Mobile loan drama are planning to set aside a large part of the debt from their books ahead of the December 31 end-date for the fiscal year.

According to the nation online, The banks involved in the new deal are Zenith Bank, GTBank, First Bank, United Bank for Africa, Fidelity Bank, Access Bank, Ecobank, First City Monument Bank, Stanbic IBTC and Union Bank.
This brings to mind the recent announcement by Zenith Bank yesterday that it had made a provision for 30 per cent of its part of the loan to 9Mobile (formerly known as Etisalat Nigeria), the country’s fourth largest telecoms group when it announced a pre-tax profit of N92.18 billion for its half year report. Although, the bank declined to disclose its exposure to the telecoms group.

Perhaps, one might want to understand how this resolution may have been arrived at. How could such loan be forgiven without consequences? Are there legal structures backing such resolutions up.

According to CBN Prudential Guidelines, banks are expected to review their credit portfolio continuously (at least once in a quarter) with a view to recognising any deterioration in credit quality. Such reviews should systematically and realistically classify banks’ credit exposures based on the perceived risks of default.

To facilitate comparability of banks’ classification of their credit portfolios, the guidelines say that the assessment of the risk of default should be based on criteria, which should include, repayment performance, borrower’s repayment capacity on the basis of current financial condition and net realisable value of the collateral.

Recall that trouble started when Etisalat NG defaulted in the payment of a $1.2 billion debts they owed a number of banks, banks which included many Nigerian banks and some foreign ones. Perhaps the intervention of the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) has been instrumental in resolving the crisis. Only time will tell.