N766M NITEL FUND TRAPPED IN FAILED BANKS, ALLEGES REPORT

Mergers, Acquisitions and Financial Results

NITEL has N766.44 million in three distressed banks, a cash position report on the company has shown. The report, which covered March 2003 to March 2004, showed that out of the amount, N12.77 million was in AIB Ltd, N536.53 million in AFEX Plc, while N117.14 was in CTB Ltd. The News Agency of Nigeria (NAN) alleges that the money, lodged in one of the distressed banks, was meant to settle pension payments. The report also showed that the company operated at a loss within the period as its total cash position dropped from N17.67 billion in March 2003 to N540.59 million in March 2004. Details of the cash position showed that the company’s accounts were in the red, having spent over N17.68 billion within 12 months.

Apart from the three distressed banks, NITEL operated accounts with the First Bank, Union Bank, FSB, Zenith bank, Prudent Bank and Guaranty Trust Bank. It operated four domicilliary accounts respectively in dollars, pounds sterling, Euro and a domicilliary access account as well as Treasury bills and a Collateral fund. The Naira equivalent of the domicilliary account in dollars showed that in one year, the over one billion Naira NITEL had dropped to N5.88 million dollars, while the Naira equivalent in the Sterling account reduced from N111.87 million to N55.72 million within the same period.

Furthermore, the Naira equivalent of the Euro account, dropped from N26.56 million as at March 2003, to a total of N18.84 million by March 2004. From the N13.48 billion it had in treasury bills in March 2003, only N141.75 million remained as at March 2004. While its operating cost per line increased from N13,445 in April 2003 to N14,886 in April 2004, its operating revenue per line dropped from N98,089 in April 2003 to N14,886 in April 2004. On the other hand, capital cost per line which was N200.46 in 2003 has spiralled to N1,164.89.

Project level indicators contained in the report, however, showed that total annual capital investment, which stood at N108.70 million as at April 2003 jumped to N628.65 million in April this year. Meanwhile, a report on NITEL in a subscription only publication has alleged that since its current managers took over in Feb. 2003, there had been "pillaging of the institution which used to be the cash cow of the federal government". "There is now very serious liquidity crisis at NITEL, a parastatal that used to be awash with cash", the report said. It also alleged that "for the first time since its inception in 1985, NITEL had to secure a loan of N1.5 billion to pay October salaries" in 2003.

Vanguard