It was an unwelcome surprise for many last month when UBA, Nigeria’s third-biggest bank, said it would probably report a loss for 2011. The much-trumpeted theory had been that the worst was over for Nigeria’s banks, thanks to a clean-up of the 2009 margin-lending crisis.
UBA said the main problem was a write-down on the latest batch of debt sold at a discount to the state bad bank, Amcon. The biggest chunk was a 40% haircut of almost $100 million on a loan to Zenon, a downstream oil and gas company active in Nigeria’s multi-billion-dollar petroleum-imports business.
The announcement sparked doubts about the health of other banks’ 2011 results. Indeed, these banks had to make similar sales to Amcon late last year, sometimes because the loans had breached the single-obligor limit of 20% of equity.
 |
| Bolaji Balogun, Chapel Hill Denham |
Bolaji Balogun, chief executive of local investment bank Chapel Hill Denham, which advised on the process, says Amcon bought more than N500 billion ($3.3 billion) of loans from banks at the end of December. Zenon’s debts to UBA and other banks accounted for more than $1 billion of this, according to Balogun.
