In what appears to be yet another twist in the Etisalat Nigeria saga, the Federal Government through the Central Bank of Nigeria (CBN) and Nigerian Communications Commission (NCC) appears to have “nationalized the company”. Just last week Nairametrics reported that the Hakeem Bello Osagie had resigned as Chairman of the company.
An article on Sunday’s BusinessDay suggest the CBN/NCC have taken up board position in a newly reconstituted board.
Here is what we know about the move:
- The Etisalat Nigeria board has been restructured to 7 board positions.
- The consortium of 13 banks will nominate four board members.
- Two representatives will come from the Nigerian investors.
- The CBN/NCC will have one board member.
Is Etisalat Partially Nationalised?
Nationalization is the process of converting a private asset into a public asset through an equity investment by the government or other forms of control that might not be equity. Nationalization usually takes place in strategic industries such as defence, communications, banking, energy and natural resources. Hence this may have prompted the government’s decision to take over the firm.
Whilst this deal appears to have served the interest of all parties (if we are to believe the rhetoric coming from the parties), including a representative of the CBN and NCC suggest the government may be playing a further role aside from ‘midwifing’ an amicable resolution. Typically, government officials such as the CBN, or any other regulator for that matter, get nominated as board members in private entities if they are about to invest in a private entity, are already significant shareholders or represent a strategic national interest.
Why the CBN could have considered nationalisation
The CBN/NCC taking up a board position thus implies that a bailout of the company may be on the table. Whilst details still appear sketchy, a motive for investing in Etisalat at this stage fuels rumours of a likely nationalisation.
To ensure the company avoids a forced receivership and a subsequent write down of the loans by the banks, the CBN in conjunction with the NCC may be considering a bridge finance for the company and the banks, for talks to continue amicably. This will at least provide the company the much-needed stability it requires to attract local or foreign investors.
The regulators could also see this move as an effort to restore investor confidence in the economy and save guard jobs. Analysts inform Nairametrics that the government is worried that a mishandling of this crisis could spill over into a more precarious situation for the economy thus the need to step in even if it means stumping up some cash in the short-term.
Another point of view also suggests the CBN/NCC may have opted to take a board seat in Etisalat to give the former some clout and legal basis in the ongoing negotiations with the banks and potential investors in the company. It also gives it a direct participation in the management of the company particularly in the areas of hiring, corporate governance and funding.
Whatever the case it, direct funding or just mediation, critics will opine that including regulators as board members of Etisalat is nonetheless a quasi nationalisation of the company. Critics will point to the moral hazard this creates due to the perception that private firms would be more likely to engage in reckless behaviour, knowing that the government would bail them out.