Fidelity Bank makes provision for 50 percent of 9mobile’s loan

Fidelity Bank says it has made provision for 50 percent of its loan to 9moile, telecommunications company formerly known as Etisalat.

Reuters reports that Gbolahan Joshua, Fidelity’s chief operations and information officer, made this known on Wednesday.

Joshua said the bank placed 9mobile on a watchlist after it made the decision to increase its provisioning from five percent to 50 percent.

Already, the bank has expressed intentions of issuing local debt to raise funds.

A provision is an allowance set aside to cover loan losses. A lender makes provision for a loan if it perceives that the debtor will default on the loan.

The company, which is Nigeria’s fourth-largest telecommunications company, had been in the news for its inability to repay a $1.2 billion loan it took from a consortium of 13 banks and is now up for sale.

Joshua said Fidelity Bank expects 9mobile’s sale to new investors to be concluded by the second half of the year, by which time the exact loss on the loan would be known.

“By the first half of 2019, the 9mobile sale may have been completed and there would be clarity for all lenders,” he said.

“We’ve made 50 percent (provision) on the exposure to 9mobile, we don’t expect that by the time the sale would be concluded we would see another classification.”

According to Joshua, a 100 percent provision on loans to 9mobile would amount to less than 40 percent of its 2017 annual profits and it would be able to generate sufficient earnings to continue its business.

In 2017, Zenith Bank, another lender made provision for 30 percent of its loan to 9mobile.