(Ecofin Agency) - Ecobank is working hard to overcome the challenges its Nigerian branch is facing. On September 16, 2024, the bank shared some encouraging news with investors: it reached an agreement with creditors about its $300 million Eurobond, which is due for repayment in April 2026.

One key requirement of this loan was that the bank had to maintain its long-term resources at least 10% of all loans given to customers. However, by June 30, 2024, this balance was disrupted due to structural issues. A large portion of Ecobank Nigeria's loans is in U.S. dollars, while its capital is in naira. The rapid decline of the Nigerian currency—from 951.8 naira per dollar at the start of the year to about 1,628.5 naira by the end of July—has put extra pressure on the bank's finances.

Now, Ecobank Nigeria has until September 2025 to restore this important balance, which is crucial for maintaining the trust of its creditors. While the situation is manageable, it remains sensitive given the ongoing uncertainty in Nigeria’s economy. The bank will be closely monitoring two main factors: oil prices and U.S. monetary policy. A drop in oil prices could increase the risk of further devaluation of the naira, while changes in U.S. monetary policy could impact the dollar's value and affect how the bank manages its debt.

To address these challenges, Ecobank Nigeria is considering several strategies. The Central Bank of Nigeria has required banks to raise their capital to 200 billion naira, which translates to a need for an additional 7 billion naira for Ecobank Nigeria. In response, its parent company, ETI, based in Lomé, has already injected $10 million—approximately 16.3 billion naira—pending regulatory approval. This cash injection is expected to help ease immediate financial pressures.

Ecobank Nigeria has also received the green light to issue $200 million in bonds, split into four tranches of $50 million, with the first set to launch in March 2025. The bank is also exploring the possibility of retrieving a $200 million investment made in ETI Finance, its subsidiary. This move would help reduce its risk exposure and capital requirements.

Despite these efforts, ongoing structural challenges remain. The bank has not paid dividends in five years, and the current situation suggests that this trend may continue into 2024. Ecobank Nigeria, which represents 17.9% of the group’s loan portfolio, remains heavily focused on the downstream oil sector, which is particularly risky.

While creditors and the Central Bank of Nigeria have shown understanding, Ecobank Transnational Incorporated is feeling the effects on the international stage. During its latest bond issuance, ETI raised $390 million but had to offer a yield of 10.37%. This occurred amid declining interest rates in the U.S., Europe, and China. The arrangement fees for this operation reached $10 million, bringing the total to $400 million. Interest will also be paid twice a year on the remaining balance.

These funds will help refinance a previous $350 million loan, along with a $40 million surplus. However, the group must continue to monitor its capital in other countries, including Kenya, Uganda, and Guinea. This recent bond issuance is part of a larger plan allowing ETI to raise an additional $200 million in international markets.