This Day (Lagos)

30 January 2013

Nigeria: U.S.$100 Million Debt - Fidelity Bank Lists Conditions for Customers

Fidelity Bank Plc has outlined conditions its local customers must meet for them to benefits from the $100 million two-year loan it plans to raise from the international debt market.

Group Managing Director/Chief Executive Officer, Fidelity Bank, Mr. Reginald Ihejiahi, who disclosed this in a chat with THISDAY Tuesday, said one of the condition was for such customers to have purchased forex hedging contracts to protect against movement in exchange rates or shortfall in dollar cash flows.

Fidelity Bank at the weekend mandated Citibank to raise $100 million via a two-year loan from the international debt market, to help increase its foreign currency lending capacity.

The bank said it took the decision because of an increase in demand for foreign currency loans from its customers in all sectors of Nigeria's economy especially within the oil and gas and telecom sectors.

Responding to enquiries from THISDAY, Ihejiahi said customers would benefit "if they have dollar revenues or dollar denominated contracts. Also, if they have purchased forex hedging contracts to protect against movement in exchange rates or shortfall in dollar cash flows."

Meanwhile, analysts at Renaissance Capital (RenCap) Tuesday welcomed the move by Fidelity Bank.

The financial advisory firm said: "We understand that the bank has seen a pick-up in demand for foreign currency loans, hence the transaction. We welcome Fidelity Bank's efforts at increase its gearing. We think over time, this should be positive for its returns on investments.

"However, $100 million represents just about two per cent of the bank's nine month 2012 total assets; therefore, we consider the size of the on-going loan raise as minute and possibly a prelude to a larger transaction.

"Firstly, we think the two-year tenor would be inadequate to give the bank a strong footing in emerging deals in the power and oil and gas sectors, given their typically lengthy nature.

Secondly, though the bank had 15 per cent of its deposits in domiciliary accounts ($565 million) in nine month 2012, we do not think it would be financially prudent to rely on these balances to fund deals in power or oil and gas given the short-term nature of these funds," it added.

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