The questionable intervention by CBN, NCC in Etisalat debt saga
By Joseph Okoye
(Culled From The Nation)
According to national newspaper publications, the Central Bank of Nigeria (CBN) and National Communications Commission (NCC) have met and agreed to halt the threatened takeover by 13 local banks of Etisalat which took a $1.2 billion facility from the banks in 2013 and has subsequently defaulted on repayment of the loans.
The strange intervention by the CBN and NCC in what is no doubt a purely commercial contractual agreement between two private sector entities raises a number of troubling questions that need to be closely examined with a view to ascertaining the legal validity of the intervention and outlining the possible disastrous consequences.
Let us begin the examination by first looking at the background of the intervention.
According to the publications, in 2013 Etisalat obtained a loan of N377 billion or $1.2 billion from a consortium of 13 local banks to finance its network expansion and upgrade. The loan would normally have been taken under an agreement which would require Etisalat to repay the loan on mutually agreed terms and conditions including, among other things, a repayment schedule and penalties for default. For transactions of this nature, one of the key and in fact ultimate default penalty, is the takeover or control of the defaulting debtor’s assets so as to recover as much of the debt as possible.
It is important to note that this doomsday penalty is necessarily only invoked after all agreed remedies in the agreement have been exhausted to no avail and it has become clear to the lender that the bad performing loan was at risk of being unrepaid forever. It is also important to highlight the point that no sane lender would take over a debtor’s assets without first making solid arrangements on getting the assets to be better managed.
Against the foregoing background, the first question that comes readily to mind is: was Etisalat in clear cut breach, through loan repayment default of the agreement signed with the 13 banks? Going by the information provided by the press, the answer would seem to be an unequivocal yes; Etisalat, by defaulting on repayment of the loan and failing to remedy the default over the remedial period that must have been specified in the agreement, was in breach. Consequently, the banks have every right under the agreement to apply the agreed penalty for such a breach.
The second question that should be asked is whether or not the CBN and NCC were parties to the agreement? The answer from all indications is clearly no, they could not have been parties to the agreement. Other pertinent questions include the following:
1) Does the oversight mandate of both institutions give them the right to defer or simply terminate any part of the legally binding agreement between Etisalat and the 13 banks?
2) Of what use is a legal contract if it can be arbitrarily shoved aside on the spurious argument that its complete execution would be harmful to the subscribers of Etisalat who in a worst case scenario have the option to port to other networks?
3) Where were the CBN and NCC when the contract and its perceived harmful default clause was being agreed to and signed by the lender and the borrower?
4) What happens if, despite the illegal reprieve granted by the CBN and NCC, Etisalat ends up not being able to repay the loan? Will the CBN and NCC then write it off in the interest of Etisalat subscribers?
5) Banks in Nigeria are daily applying the loan default penalty clause on borrowers that are facing the same economic difficulties that Etisalat is facing. The properties or businesses of such loan defaulters are being taken over by the banks as specified in relevant agreements. Why is the CBN not coming to the rescue of such loan defaulters?
6) On its part, the NCC not too long ago imposed a catastrophically monstrous financial penalty on MTN; a veritable albatross from which the bewildered telecommunication company is still reeling. Why did the NCC in taking this step not take into consideration the negative impact on network expansion/operations and by extension the poor quality of service that the fine would impose on the company’s millions of subscribers? Why the different treatment of both institutions?
7) So many other questions abide but let us pause with one final one. Have both the CBN and NCC considered the impact that their intervention may have on foreign investors that may become even more wary and reticent to invest in an environment of gross legal uncertainty?
The long standing hope of the Nigerian masses for a corrupt free country in which government institutions will strictly adhere to and uphold the laws of the country appeared to be close at hand with the advent of the current administration and its holy grail mantra of change from the disorder, non-respect of the law and blatant corruption, both within and outside the government, of some of the previous administrations. So much noise has since been made under the present administration, claiming success in curtailing the blatant corruption and excesses that have thus far been a hallmark of our public institutions. However, the strange, uncalled for interference of CBN and NCC on a matter on which they have neither the mandate nor the rational ground on which to justify their action smacks of the not too distant past and confirms the veracity of the epigram put forward in 1849 by the celebrated French critic and novelist, Jean-Baptise Alphonse Karr who perceptively stated that “plus ca change, plus c’est la meme chose” which in English means “the more things change, the more they stay the same.”
Joseph Okoye, media specialist consultant, is based in Abuja.