THE Loan Market Association of Nigeria with key objective of improving liquidity, efficiency and transparency in the primary and secondary syndicated loan markets in Europe, the Middle East and Africa (EMEA), had concluded plans to run its first Nigeria Loans Conference at Eko Hotel & Suites, Victoria Island, Lagos.
The conference, meant strictly for members, is scheduled to hold on Wednesday, 24. The agenda will cover the following topics: Economic Outlook; What’s next for Nigeria’s syndicated loan market?;Case Study: Structuring Your Syndicated Loan; Alternative Lending Strategies; Hot Topics Quick Fire and Tackling NPLs.
By establishing sound, widely accepted market practice, the LMA seeks to promote the syndicated loan as one of the key debt products available to borrowers across the region.
Information available on its website indicated that as the authoritative voice of the syndicated loan market in EMEA, the association works with lenders, law firms, borrowers and regulators to educate the market about the benefits of the syndicated loan product, and to remove barriers to entry for new participants.
Since the establishment of the LMA in 1996, its membership has grown steadily and currently stands at more than 850 organisations covering over 65 countries, comprising commercial and investment banks, institutional investors, law firms, service providers and rating agencies.
It works in five main areas: documentation, market practice and guidance, loan operations, education, and dialogue with legislators and regulators.
Regulatory changes often have unintended consequences, so the LMA has a vital role in mitigating any possible negative impacts on the loan product, whether generally, or in relation to specific sectors such as leveraged, real estate or commodity finance.
“Whilst we have made significant progress in addressing the adverse effects of regulation for our members, undoubtedly, changes in the regulatory and general legislative landscape will continue, not least arising from the regulatory response to COVID-19, as well as potential opportunities to bring about positive change.
“Private finance has a critical role to play in catalysing the transition to a sustainable global economy. At the LMA, we are dedicated to promoting growth and innovation in sustainable lending practices, and supporting the syndicated loan market as new sustainable finance regulation emerges. Our ongoing initiatives include: documentation projects, including the release of model provisions for sustainability-linked loans, together with work on the preparation of an accompanying term sheet and a template mandate letter for sustainability coordinators;supporting the development of market practice, including the publication of updated versions of the Green, Social and Sustainability-Linked Loan Principles and accompanying guidance documents; responding to regulatory proposals in relation to sustainable finance; and attending and hosting various sustainable finance events, “ it stated on its website.
However, stakeholders believe that it is increasingly becoming worrisome that Nigerian big banks have written off bad loans with impairments, which laid bare the susceptibility of lenders to unfavorable macroeconomic conditions characterized by heightened inflationary pressure and higher finance costs.
But, spiraling loan loss expenses which offset gains from net interest income are not deleterious to banks’ bottom line (profit), thanks to a huge foreign exchange revaluation loss.
Available data Data shows the largest listed banks collectively incurred N1.16 trillion in impairment charge for credit losses on loans in December 2023, which represents a 148.78 percent uptick from 2022’s N466.78 billion.
A breakdown of industry figures shows loan loss expenses were N275.21 billion in 2021; 2020, N254.30 billion; 2019, N85.16 billion; 2018, N134.04 billion; 2017, N389.92 billion, and 2016, N437.21 billion.
The International Monetary Fund (IMF) has projected that Nigeria’s economic growth will decline from 3.2 percent in 2023 to 3.0 percent in 2024.
In February 2024, Nigeria’s headline inflation rate rose to 31.70 percent, up from 29.90 percent in January 2024, marking an increase of 1.80 percent.
There has been pressure on companies who have difficulties paying interest on loans that have ballooned due to elevated borrowing costs and the banks bear the brunt of this macroeconomic uncertainty.
Asset qualities for some banks have deteriorated, but there is no cause for alarm since the central bank is positioning them to better withstand macroeconomic shocks.
It appears the regulators and sector players have learned a lot of lessons from exposure to the oil and gas of 2016 brought on by a sharp drop in crude oil price of m-d-2014.
The big banks had intensified their risk management strategies with efficient allocation of loans portfolio while avoiding risky sectors.
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