The Nigerian banks that Etisalat owes have rejected a plan by the telecom company to convert part of the money it is owing from dollars into Naira.

Instead, the banks want the owners of the company to invest more money to enable it pay up.

A banker with knowledge of the ongoing negotiations told Reuters that the loan which spans seven years and on which Etisalat Nigeria missed a payment, has a dollar portion of 235 million dollars which the telecoms operator wants to convert into Naira because of the dollar scarcity. But the banks refused.

"Etisalat is asking for us to convert the dollar component to Naira but banks don't want that option and have told them to talk to their parent to settle the loan," the source said, adding that regulators, Central Bank of Nigeria, CBN and Nigeria Communications Commission, NCC favoured the conversion.

The UAE's Etisalat owns 45% of Etisalat Nigeria, while Abu Dhabi's Mubadala owns 40% of the company. Their representatives are due to meet with the banks on Thursday for the debt talks which will be mediated by CBN and NCC.

The reason for the rejection of the conversion proposal is not unfounded as most of the banks involved in the Etisalat Nigeria loan had borrowed money in dollars from abroad to participate. This means that further naira weakness would see them receive fewer dollars.

“The currency had lost half of its value since the loan, which matures in 2020, was made. Interest is due monthly and the next principal payment is due in May,” the source said.