Yemisi Izuora
Nigeria’s Commercial banks are working round the clock to recover over N6.125 trillion borrowed by oil firms as the financial institutions get set for recapitalization.
The banks have reportedly issued correspondences to oil firms, marginal filed operators and downstream operators, as debts in the sector, according to a 2018 CBN financial stability report, showed that N1.235 trillion had been added to the sector’s debt profile since 2016 when it stood at N4.89 trillion.
Banks are beginning to takeover collateral tied to the loans, a management staff of one the marginal field oil firms reportedly said over the weekend, as banks followed up on the correspondence sent to his firm.
“Oil firms form the major part of their (banks’) heavy debtors’ list and they have written some of us with non-performing loans to prepare for the worst,” said one of the oil firm operators.
The banks’ exposure in terms of loan facilities to the oil sector is, according to the CBN document, about N6.1 trillion debts.
It has been reported that bank’s non-performing loans have been on the decline and much of which was attributed to the oil sector.
As the CBN announced in 2019, the immediate suspension of interests on non-performing loans to oil marketers and similarly granting Deposit Money Banks the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.
Experts have raised concern that CBN’s planned recapitalisation programme might trigger fresh waves of mergers and acquisitions in the banking industry even though the country’s banking industry had grown strong, as Capital Adequacy Ratio (CAR) increased from 10.2 per cent in December 2017 to 15.5 per cent in September 2019 and the percentage of Non- Performing Loans (NPLs) declined from its high of 14.7 per cent in January 2017 to under 7 per cent as at October 2019.
Banks had helped indigenous firms with financing, helping them become key players in the nation’s oil and gas industry, but in recent years, indigenous firms are now struggling to maintain the assets they acquired through Federal Government’s marginal field programme.