Youssou N’Dour to Bobi Wine, African musicians join fight against coronavirus
African music stars are taking more action than ever before to combat the pandemic, through donations, songs, awareness-raising music videos and appeals to fans.
By Ruth Olurounbi, and David Whitehouse
The leverage and hedging strategies against lower prices used by Nigeria’s oil producers will determine their chances of survival – and the size of the hit to their lenders.
“It is clear that some of the most over-leveraged local players in Nigeria will not survive the current price collapse,” said Yann Alix, a partner at Ashurst in London. “This will bring pain to their lenders,” in Nigeria and abroad, he says.
The determining factor will be whether or not producers hedged when oil was above $60, Alix says. A number of “more conservatively managed firms will be dragged into restructuring discussions with their lenders if the current level is maintained beyond a couple of months,” Alix says.
“The financial health of oil and gas companies and their ability to service their debt are extremely important to Nigeria’s banking industry,” adds Michael Famoroti, an economist at Stears in Lagos.
Indigenous oil and gas companies will struggle as oil prices continue to decline, says Eromosele Victor, chairman at M. E. Consulting. He expects a moratorium on debt repayments to be worked out between banks and producers.
Volatility usually brings its own opportunities for those who have avoided excessive borrowing. The oil price crash creates openings for cash-rich and under-leveraged players to pick up “quality producing or near-producing assets at a significantly lower price” than previously, says Alix at Ashurst.
The weaker naira may also provide some relief for lenders.
The impact on banks might be softened by the diversification into consumer loans that some have pursued, says Ebenezer Seun, a private-wealth executive at Barino Investments in Lagos.
But a prolonged lockdown will also affect retail loans sooner or later, he says. “Some lower-tier banks in weak positions will most likely end up being acquired in the wake of this crisis.”
The bottom line: More consolidated and cost-efficient Nigerian oil and banking industries could be a surprise long-term result of the coronavirus and oil price crises.
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The world is facing a crisis of the likes not seen since 1945 and the creation of the United Nations. Antonio Guterres spoke about this on Tuesday 31 March to Jeune Afrique, while unveiling the report which takes stock of measures to be taken to deal with the COVID-19 pandemic. Measures that address health, economic and social aspects of the crisis.
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