Oil firms’ N4.58tn loan repayment under threat – Investigation

The coronavirus-induced sharp fall in global oil prices poses a threat to the ability of oil and gas companies in the country to repay a total loan of N4.58tn, investigation has shown.

The loans advanced to oil and gas companies by Nigerian banks rose to N4.58tn in the fourth quarter of 2019 from N4.55tn in Q3, according to the National Bureau of Statistics.

A breakdown of banking sector credit to the private sector showed that the oil and gas sector received the biggest credit from banks.

The N4.58tn represented 26.63 per cent of the N17.19tn loans given to the private sector as of Q4 2019.

The amount of non-performing loans in the oil and gas sector stood at N219.47bn as of Q4 2019, down from N878.41bn at the end of 2018, the NBS data showed.

Industry analysts have said with the oil price plunge, many oil firms would have no choice but to restructure their loans.

A former Chairman of the Petroleum Club, Lagos, Mr Godswill Ihetu, said, “There is no way the loans will not be impacted. Under normal conditions, you will worry for the banks.

“But now, with this worldwide economic crisis, I would think that the central bank will support the banks. And the banks won’t press the oil companies too much because they can see the problem.”

The President of the Nigerian Association of Petroleum Explorationists, Mr Alex Tarka, told our correspondent that oil price slump had taken a huge toll on the association’s members.

He said, “We respond sharply because a lot of costs that go into this upstream operation are mainly borrowed funds, and those loans usually were taken at certain interest rates based on crude prices at that time.

“Our members are feeling the impact because quite a reasonable number of them depend on these drilling operations to sustain their businesses. When you take out exploration, a reasonable number of our members will be impacted.”

The Central Bank of Nigeria said in March that it had given all Deposit Money Banks leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the COVID-19 outbreak, particularly those in the oil and gas, agriculture and manufacturing sectors.