Deposit Banks May Resume Dollar Loans As Naira Appreciates

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Naira Increases In Value As Surplus Dollars Hit Nigeria Market

Following the palpable improvement in the value of the Naira, there are indications that the Deposit Money Banks (DMBs) will soon start to raise dollar-denominated loans, especially Eurobonds.

It is understood that banks were now favourably disposed to raising dollar loans following the creation of the Investor & Exporters FX window by the Central Bank of Nigeria (CBN) and the subsequent appreciation of the naira.

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The Punch, while quoting top sources in the banking sector, is reporting that another reason the banks are considering Eurobonds is because some of them are looking at refinancing their dollar loans, which will soon start falling due.

A top bank executive said, “Many banks have no choice than to raise dollar loans or Eurobonds partly to refinance their Eurobonds falling due, or to take advantage of the appreciation in the naira value to raise dollar funding.”

It was gathered that while Guaranty Trust Bank Plc’s $400m Eurobond is due in November, Fidelity Bank Plc’s $300m is due next May. Access Bank Plc has $350m of bonds due in July.

GTBank has said it has no plans to issue fresh Eurobonds, but Fidelity Bank and Access Bank have yet to decide.

This is just as economic and financial experts have agreed that the banks will start to raise dollar-denominated loans.

Even so, more lenders will issue Eurobonds because they need dollars to offer loans in the United States currency or to repay debt, an analyst at Vetiva Capital Management Limited, Mr. Lekan Olabode, told Bloomberg, adding that more banks would issue Eurobonds, because they needed dollars to offer loans and to repay debt.

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Already, Ecobank Transnational Incorporated has said it is planning to raise $400m five-year convertible bond this month to refinance debt and provide short-term bridge funding for non-performing loans at its Nigerian unit.

Experts believe more banks will raise dollar loans this year and next year.

Already, United Bank for Africa Plc has raised $500m in its first Eurobond sale.



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