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Business News

Unity Bank to sell N400 billion in bad loans to Frontier Capital

Unity Bank Plc has revealed plans to sell its N400 billion bad loans to new investors to clean up its balance sheet. This new move will facilitate the the injection of new cash into the bank.

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Unity Bank

Unity Bank Plc has revealed plans to sell its N400 billion bad loans to new investors to clean up its balance sheet. This new move will facilitate the injection of new cash into the bank.

The sale of the bad loans to a new investor, Frontier Capital Alternative Asset Ltd, will cut the ratio of non-performing loans to near zero from almost 50 percent and help to shore up Unity Bank’s liquidity.

Speaking in Lagos, Chief Financial Officer, Unity Bank,  Ebenezer Kolawole, noted that the deal will help the bank sign an agreement with a foreign equity investor that it hopes to finalize during the first half of 2019.

According to Bloomberg, Unity Bank is trying to raise about N270 billion to recapitalize its operations after missing a regulatory deadline last year to bolster the amount of cash it sets aside as a buffer against potential shocks.

“We are on the verge of completing our capitalization, we are raising substantial capital that will block the hole in the bank.”

Frontier Capital Alternative acquired the bad loans after making an initial payment of N6.4 billion to Unity Bank. It recovered N5 billion in the first half of this year while both companies have an agreement to share the recovered funds over the next five years.

Although the bank is yet to release its 2017 financial statements after reporting its second consecutive year of negative Capital Adequacy Ratios CAR in 2016. That year, net income plummeted almost 54 percent to N2.18 billion, with assets of N493 billion.

Previous failed attempt to raise capital

Recall that earlier in the year, the bank had an impressive outlook and was adjudged the best performing stock. This was largely attributed to a rumored $1 billion investment plan by a private equity firm, Milost Global.

However, the deal did not sail through as the private equity firm had to pull out, citing threats from unnamed sources.

Although the bank denied entering into such an agreement, Securities and Exchange Commission (SEC) is currently investigating the deal.

Unity Bank share price are currently traded at N0.74 on the floor of the Nigerian Stock Exchange, with a one-year return of 34.55%.

Alternative Investment Capital Limited operates as a private equity firm. The Company focuses on energy, technology, and life science sectors, as well as offers investment management and advisory services.

Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via [email protected]

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Columnists

FGN Free Meter Program and getting power to the people

Without effective penalties for erring DisCos and consumers, progress may still remain very slow.

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Electricity, Buhari moves against Discos and agents that collect money for prepaid meters

According to news reports, the Minister of Power, Mamman Saleh on Wednesday said the distribution of the four million free electricity prepaid meters pledged by the Central Bank of Nigeria would soon begin across the country.

According to him, the government is wrapping up the distribution of its initial one million meters, which he labelled phase zero, and would soon begin the distribution of the four million sponsored by CBN, which he tagged phase two. He also noted that the Federal Executive Council approved N3bn for the execution of six major electricity projects in the country to upgrade Nigeria’s electricity facilities and improve power supply across the country.

Ineffective metering remains a major drawback to the success of power sector reforms in Nigeria. While some consumers avoid paying for power consumed through meter bypass, some other consumers are made to pay for what they have not consumed through estimated billing by DisCos.

DisCos have been largely unsuccessful with metering their customers.

As far as inadequate metering is concerned, DisCos over time, have used this situation to their advantage via estimated billings. It appears that fully metering customers are currently being viewed as a disincentive, given that estimated bills can easily be manipulated.

According to a report by the Nigerian Electricity Regulatory Commission (NERC), only 4,234,759 (40.27%) of the total customer population of 10,516,090 were metered as of 30 June 2020. Clearly, this validates the widely held view that there are a wide number of customers on estimated billing which gives room for illegal connection to the networks and in turn corrupt practices. NERC further revealed that only three out of 11 Electricity Distribution Companies in the country had metered more than 50% of electricity customers under their coverage areas as of June 2020.

Effective metering in our view is one step ahead in solving the myriad of problems embattling the Nigerian power sector. Though supposed to be unpaid for, many customers in a bid to avoid the bureaucracy associated with getting meters have paid to get their own meters. We believe the provision of meters to all end-use customers will go a long way in ameliorating the liquidity squeeze in the power sector whilst also providing cashflow to the DisCos for investment in equipment needed to evacuate unused electricity to consumers nationwide.

We laud the FG’s efforts at distributing meters freely to end-users, but we note that without effective penalties for erring DisCos and consumers, progress may still remain very slow.

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CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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Coronavirus

Covid-19: WHO approves China’s Sinopharm vaccine

WHO has announced the approval of China’s Sinopharm vaccine for Covid-19 vaccination.

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Covid-19: First world nations oppose waiving intellectual rights for vaccine development

The World Health Organization (WHO) has announced the approval of China’s Sinopharm vaccine for Covid-19 vaccination.  The vaccine is reported to have 79% efficacy against covid.

This was disclosed today in a report by Reuters. The vaccine would also be the second Chinese-made vaccine after Sinovac vaccine and would be the first developed outside Europe and North America to receive WHO accreditation.

“This expands the list of COVID-19 vaccines that COVAX can buy, and gives countries confidence to expedite their own regulatory approval, and to import and administer a vaccine,” WHO Director-General, Tedros Adhanom Ghebreyesus said.

The WHO added that the easy storage requirements make it highly suitable for low-resource settings.

“Its easy storage requirements make it highly suitable for low-resource settings,” a WHO statement said while also disclosing that the vaccine has been approved for people above the age of 18 to receive two shots.

“On the basis of all available evidence, WHO recommends the vaccine for adults 18 years and older, in a two-dose schedule with a spacing of three to four weeks,” the statement added.

The vaccine was created by Beijing Biological Products Institute, a subsidiary of Sinopharm subsidiary China National Biotec Group, with an efficacy of 79% for all age groups.

The WHO however, admitted that few older adults (over 60 years) were enrolled in clinical trials, so efficacy could not be estimated in this age group.

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In case you missed it

The quest for vaccine efficiency got a major boost earlier this week as Nairametrics reported that the United States government announced that it supports the waiver of Intellectual Property Protections on Covid-19 vaccine development, in a bid to boost the fight against the pandemic, and says it will participate in the Okonjo-Iweala-led WTO negotiation to make it happen.

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