Tuesday, December 09, 2014 9:41 AM / FBN Capital Research
For our third commentary on Nigeria’s macro worries, we turn to cross-border lending and the BIS figure for the claims totaling US$19.0bn of its reporting banks on Nigeria at end-June 2014.
The claims typically include deposits and balances with other banks, loans to non-banks and banks, and holdings of debt securities. The BIS covers 31 countries, which are principally OECD members along with a few offshore banking centres and a number of others such as India.
These claims represent just 3.8% of 2013 GDP. They include, subject to the definition above, Nigerian sovereign external debt (of US$9.5bn at end-September). We are not aware of any Nigerian data source for current, non-sovereign external debt.
Eurobonds issued by Nigerian banks would be included in as much as they are held by BIS reporting borrowers. These issues were frequent throughout 2013 and up to mid-year (and the first traces of Nigeria’s macro worries). Their purpose was either to meet the fx borrowing demand of local customers such as oil companies and privatised power operators, or to strengthen the issuing banks’ own capital base.
One pressure point would be a local oil company which has borrowed in fx for exploration and is now confronted by the slide in the oil price. Another would be a power company anxious about the regulatory and operating challenges which are pushing back its development of a viable business.
The largest category in our chart is unfortunately “others”, the reason being that, while the BIS cites a figure of US$11.7bn for European banks, it does not show all the parts which make up the total. For the UK, for example, the figure is not available.